Congress proposes tax on all Net

An influential congressional committee has dropped a political bombshell by suggesting that a tax originally created to pay for the Spanish American War could be extended to all Internet and data connections this year.

The congressional report comes not long after the Internal Revenue Service and Treasury Department said they were considering how the Spanish American War tax should be reinterpreted "to reflect changes in technology" used in "telephonic or telephonic quality communications."

Congress enacted the so-called "luxury" excise tax at 1 cent a phone call to pay for the Spanish American War back in 1898, when only a few thousand phone lines existed in the country. It was repealed in 1902, but was reimposed at 1 cent a call in 1914 to pay for World War I and eventually became permanent at a rate of 3 percent in 1990.