CEOs Should Pay for Their Own Three Martini Lunches

While the world is reeling from the pandemic and American democracy faces a profound crisis, corporate lobbyists have been focused on making taxpayers subsidize lavish lunches for wealthy executives.

Their work paid off in the 11th-hour COVID-19 relief deal Congress passed late last year. Buried in the details of this modest aid plan is a provision to give executives unlimited tax deductions for their business meals for two years.

That’s how it worked back in the 1970s, when presidential candidate George McGovern had this to say about it: “There’s something fundamentally wrong with the tax system,” he said, “when it allows a corporate executive to deduct his $20 martini lunch while a working man cannot deduct the price of his bologna sandwich.”

President Ronald Reagan, of all people, actually agreed with McGovern. His 1986 tax overhaul, best remembered today for lowering overall rates, reduced the deductibility of business meals from 100 to 80 percent. In 1993, the Clinton administration pushed that deductibility rate down to 50 percent, where it has stayed ever since.

Now corporate lobbyists have managed to restore that 1970s-era perk — claiming, of course, that bigger tax write-offs for business meals would help struggling restaurants and the people they employ.

That’s the same argument they used in their opposition to the Clinton-era reform. It was flawed then and it’s even more preposterous now.

Back in 1993, the National Restaurant Association predicted that if businesses were able to write off only half the cost of their business meals (instead of 80 percent), restaurant industry sales would plummet by $3.8 billion and 165,000 jobs would be lost in just the first year.

The opposite occurred. In the year after the reform went into effect on January 1, 1994, sales at full-service restaurants grew by 3.5 percent, outstripping overall U.S. economic growth, according to Census and Labor Department data. And instead of the NRA’s predicted loss of 165,000 jobs, full-service restaurant payrolls grew by 132,300. That was a 4-percent increase, compared to only 3.5 percent growth in national employment.

Today, when the real problem is a public health crisis that’s keeping people at home, it’s even more laughable that lowering taxes on business meals will do anything to help struggling restaurant owners and employees.

In this time of crisis, any taxpayer support for corporations should require executives to treat their workers well, trim their own fat paychecks — and pay for their own lunch.

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