Supreme Court Upholds Illinois Tax on Out-of-State Phone Calls

January 18, 1989 1 min read

Washington--The U.S. Supreme Court last week upheld the constitutionality of an Illinois tax on interstate telephone calls, a move that prevented a multimillion-dollar shortfall in the state budget for the upcoming fiscal year.

If the ruling in the case, Goldberg v. Sweet (Case No. 87-826), had gone the other way, “Illinois would be digging itself out of a $300-million budget hole today,” said Barry Hickman, a spokesman for Gov. James R. Thompson. “Naturally, the Governor was quite relieved that the tax was upheld by the Court.”

Although revenues from the 5 percent tax on long-distance calls placed out of state go directly into Illinois’s general fund, they have played a key role in state school finances. In August 1987, for example, the state’s high court allowed Mr. Thompson to use $126.3 million of the disputed revenues to prevent a shutdown of the Chicago public schools.

By a 6-to-3 vote, the federal High Court rejected arguments by a group of taxpayers and gte-Sprint that the tax was an unconstitutional interference with interstate commerce.

Illinois would have been forced to return the tax revenues to telephone customers if it had lost the case.

Florida and several other states reportedly are considering whether to impose a similar tax as a result of the Court’s decision.--tm

A version of this article appeared in the January 18, 1989 edition of Education Week as Supreme Court Upholds Illinois Tax on Out-of-State Phone Calls