In the guise of helping the restaurant industry recover, Donald Trump wants to restore the deductibility of business entertainment expenses. Until 2018, this may have been the biggest rip-off for the wealthy and powerful in the entire tax code. He briefly mentioned this in his presser, but amplified in in a Tweet just after noon on Wednesday:
Congress must pass the old, and very strongly proven, deductibility by businesses on restaurants and entertainment. This will bring restaurants, and everything related, back - and stronger than ever. Move quickly, they will all be saved!
First, it has long been the law that only 50% of the cost of business meals with a client or potential client or similar business associate are deductible. The reason for this is simple — making them 100% deductible would permit a businessperson to deduct the cost of their own meal by being sure to take a client or somebody that could be claimed as a “potential client or business associate” along with them. There may have been a time when such meals were 100% deductible, but that hasn’t been the case for a long time. The 2017 Tax Cuts and Jobs Act (TCJA) didn’t change that at all. Such meals are still 50% deductible.
What WAS changed in a big way, however, was the deductibility of business entertainment expenses other than meals. This includes such things as concert tickets, tickets to sporting events, greens fees and other expenses at exclusive golf courses, etc. Whereas such expenses were 50% deductible before 2018, they are now non-deductible.
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So Trump’s proposed change will do virtually nothing for restaurants, since the rules for deductibility of meals haven’t changed. And even if meals were made 100% deductible, which as mentioned above invites all kinds of abuses, it would do virtually nothing for the kinds of restaurants where the majority of Americans eat most of their restaurant meals. People don’t take clients or potential clients to the local diner or neighborhood restaurant; they take them somewhere that they’ll be suitably impressed.
But what his proposed change WILL do is support the absurd prices for such things as courtside or skybox tickets to NBA games, skybox or directly behind home plate tickets to MLB games and the like. Oh, and of course I’m sure he never thought of this, but it will no doubt increase demand at places such as Trump NationalDoral, where the top course costs $450 for 18 holes, and where even the other courses cost from $195 to $250 per round (plus caddie fees).
This kind of business entertainment expense was always an invitation to rip off the taxpayers. You want to have great seats to a sporting event or concert, and ideally go with a friend? Simple: You find a friend who you can plausibly claim you might have some business relationship with in the future, and half the cost for the two of you is deductible. And at the next such event, your friend takes YOU and deducts half the cost of both your tickets. Ditto playing a round of golf at a top course with one of your business buddies.
Needless to say, this kind of deduction was never available to people such as ER doctors, nurses, truck drivers, or the other people who are on the front lines of the battle against this pandemic, and they didn’t do much for the typical small business owner who is struggling to keep the doors open and turn a small profit. But they were very valuable for top executives, and for the fat cats who own such things as professional sports teams and top golf courses.
Donald Trump says we’re in a war against this pandemic, and we are. And grifters have long used wars to line their own pockets. Harry Truman actually came to prominence as a Senator by chairing hearings on profiteering by government contractors during WWII. And when we’ve got a career grifter in the White House, I guess it shouldn’t be surprising that he uses this war against a deadly pandemic to try to get changes in the tax laws that will benefit himself, his family, and his rich buddies. But it’s particularly outrageous that he tries to do this under the guise of helping the restaurant industry, which is indeed hurting, and which will be helped little, if at all, by the changes he wants.
