Business Meal Deduction is Back!

The "three-martini-lunch" loophole was unpopular. It's coming back.

Welcome to Article One government.

The White House secured a provision President Trump has been advocating throughout his presidency. It re-establishes the 100% tax deduction for a category called "business meals." The current law allows only 50% of those costs to be deducted from one's income for tax purposes.

The business meal and entertainment deduction provisions are primarily of use by people who own or manage businesses. For decades it had been a way to enjoy luxuries on the taxpayer's dime. Tax laws had allowed business people to join clients in meal-and-entertainment events and deduct the whole thing as a business expense. Examples would be theater-and-dinner for yourself, client, and spouses, too. Or a weekend trip to the Superbowl and day in the corporate suite. Or, more simply, it paid for a long lunch or dinner at an expensive restaurant, drinking martinis or sampling fancy wines. Prosperous people enjoyed personal luxuries, made deductible as a wink-wink business expense. 

Voters revolted. That provision--loophole--got closed. The "entertainment" provision was no longer deductible as a business expense. Meals with clients became only 50% deductible. This reduced business for high-end restaurants whose business models were built around high margin expense-account customers. 

Trump cared about restoring 100% deductibility. His businesses--country clubs and their restaurants--are archetype examples of expense-account restaurants. He understood the effect of 50% vs. 100% deductibility. This was the basis of a deal. Trump wanted something. Democrats wanted something.

Democrats set the stage. Oregon Senator Ron Wyden, the Ranking Member of the Senate Finance Committee complained, "Republicans are nickel-and-diming benefits for jobless workers, while at the same time pushing for tax breaks for three-martini power lunches. It’s unconscionable."

In a press release Wyden said:

"There are upwards of 150,000 COVID cases per day and miles-long lines at food banks nationwide, and Leader McConnell wants to do tax breaks for three-martini lunches and broad legal immunity for his corporate donors. It’s insulting to the American people. McConnell’s disastrous proposal doesn’t add any additional weeks of benefits for Americans who are experiencing long-term unemployment, or reinstate any weekly boost to benefits."

Tough language. "Unconscionable." "Insulting."

And now Senate Democrats agree to its addition to the stimulus bill. 

This isn't hypocrisy. Wyden and Democrats don't support the provision, even though they are going to vote for it. It is give and take. It is the hard, contradictory, messy business of getting legislation passed. Trump had earlier hinted that he would veto the proposed stimulus bill. Now he won't. 

Democrats wanted increases to the earned income tax credit for the working poor. The 100% meal deduction was the price. Democrats can console themselves. Expense-account customers are known to be reliably good tippers. Some of this money will trickle down to employees.  

Joe Biden won't be the center of attention in the way that Donald Trump was. That will be a problem for the American political entertainment industry. It isn't a problem for American government; it is a solution. The Constitution was designed to create uneasy consensus among the various interests, regions, and people of a diverse country, and legislatures accomplish that in their slow, messy way, win-some-lose-some manner.

The American public may demand star-centered Article Two government. That is the political exhibition that cable news, talk radio, and the entire political-entertainment industry offer. Article One government is an ensemble show.

The Rolling Stones understood what is happening:

     "You can't always get what you want, 

      You can't always get what you want.

      But if you try sometime, you just might find, 

     You get what you need."