Business meal deduction bill gains ground

The Associated Press

WASHINGTON -- Five years ago, Congress and President Clinton sharply curtailed a tax break for businesses by slashing the amount of business meals they could deduct. Restaurants took a hit, too.

"People do not use their business meal deduction as much," said Perry Moy, owner of the Plum Garden Restaurant in McHenry, Ill. "I lost 30 percent of my lunch business." Lawmakers now are lining up behind legislation that gradually would restore the deduction, but only for smaller businesses. "This is not for the fat cats. This is really for business people out there hustling business," said a lead sponsor, Rep. Jim McCrery, R-La. In 1994, the deduction was cut from 80 percent to 50 percent of a meal's cost to help reduce the federal budget deficit. Legislation sponsored by McCrery and Rep. John Tanner, D-Tenn., would bring the deduction back to 80 percent over a six-year period beginning in 2000 -- but only for businesses with $5 million or less in annual gross receipts. McCrery wants to help businesses struggling against big corporations and to defuse the argument that the measure would benefit wealthy business people and lobbyists who enjoy three- martini lunches. Abe Schneier, lobbyist with the National Association of Wholesale Representatives, said meals often are the best times for a small- scale salesman or traveling representative to meet with clients and make deals. But sponsors say since the deduction was cut, the number of business meal spenders has dropped by more than 2 million, primarily among the self-employed and small businesses having a harder time absorbing the costs. Working in the sponsors' favor is the bill's relatively modest cost of about $3 billion over five years. In addition, Republican leaders are considering the measure as one way to offset costs on small business of a likely increase in the minimum wage. Although the proposal has significant Democratic support on Capitol Hill, the White House hasn't taken a public stand. The meal tax deduction would grow from 50 percent to 80 percent in 5 percent increments over six years, delaying its full cost impact -- and sponsors hope increasing its chances of passage.

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