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Executive Pay

Taxes and the Martini Lunch

We don't need more tax perks for business meals.

Blogging Our Great Divide
April 09, 2015

by Sarah Anderson

George McGovern’s 1972 Presidential bid never quite took off, but one of his stump lines did.

“There is something fundamentally wrong with the tax system,” that quip went, “when it allows a corporate executive to deduct his $20 martini lunch while a workingman cannot deduct the price of his bologna sandwich.”

Richard Nixon, who enjoyed the occasional martini himself, crushed McGovern in the 1972 election and ignored his prairie populism. Four years later, Jimmy Carter would pick up McGovern’s baton and try to crack down on business meal tax breaks. But Congress blocked him.

So guess who would end up taking the first bite out of the martini lunch? That renowned tax-slasher Ronald Reagan. His 1986 tax-code overhaul, best remembered today for lowering overall rates, reduced the deductibility of business meals from 100 to 80 percent. In 1993, the Clinton administration would push that deductibility rate down to 50 percent, and it hasn’t budged since.

The restaurant lobby has never been happy about this. And today — with anti-taxers totally in charge on Capitol Hill — the National Restaurant Association sees a chance to restore the business meal to its three-martini glory.

Well, maybe not to three-martini glory. Mid-day martinis haven’t actually been in fashion for years. The NRA’s arguments on behalf of full deductibility for business meals, on the other hand, haven’t changed in four decades. Allowing businesses to deduct the full cost of their employees’ work-related meals, the NRA insists, will always be good for restaurants, good for small business, and good for workers.

How well do the NRA’s arguments hold up? Let’s look at the numbers . . .

Read more at CNBC.com http://www.cnbc.com/id/102570031

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies. 

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