Slashing meal deductibility means trimming jobs

The foodservice industry provides jobs for more than 9 million Americans. Most are employed by small busineses, the engine of job creation during the 1980s. We proudly carry the banner of "No. 1 Retail Employer." And we bear a heavy portion of America's tax and job creation burden.

So why is foodservice again the target of business-limiting, job-losing legislation? Why does President Clinton want to kill the goose that lays the golden eggs?

As part of his "economic stimulus" package, The president has proposed cutting the allowable deduction for business meals and entertainment to 50 percent. If Congress includes it in the final plan, the new rate would take effect Jan. 1, 1994.

Congress already has cut the deduction once -- from 100 percent to 80 percent in 1986. The results were damaging, yet business still took advantage of the deduction. A further cut to 50 percent, however, would be absolutely devastating. More and more businesses, forced to assume 30 percent more in operating income for meals, will opt to meet across boardroom tables instead of lunch tables. The result: reduced dining traffic among the business community and lost jobs for our industry.

However, President Clinton's proposed package is just that -- a proposal. Your members of Congress will be under the hood in the coming weeks, tinkering with the details of the plan. And they will ultimately be the ones who say "yea" or "nay."

Association lobbyists have been pointing out the inequity of this idea on Capitol Hill for weeks. But this is not the type of fight that will be won or lost in Washington, D.C. Restaurants are one of the few industries located in every single congressional district. And legislators must hear from you -- a voter, a taxpayer and, most important, a job-creator in the district.

In your letter, phone call or fax, hit on these important themes about the business meal deduction:

* It's a legitimate business cost. Conducting business over a meal is an intricate part of doing business, like advertising or promotion -- both of which remain 100-percent deductible. For many who can't afford TV or radio time, a meeting over lunch is the only way to solicit their product.

* The small guy, not fat cats, would be hurt. The business meal is mostly used by small-business people who can't afford office space or other marketing techniques. A full 70 percent of those who purchase business meals have incomes below $50,000. It's used by the traveling salesman trying to make a deal over lunch or the farmer meeting with his buyer after a day in the fields.

* We're already suffering under 80 percent. The first cut in the deduction, from 100 percent to 80 percent, had a harmful ripple effect throughout foodservice and other industries. In the four years that followed the 1986 cut, real sales in the upper end of our industry fell by 6 percent, and hundreds of fine-dining establishments closed.

* It's a job loser. Slashing the deduction further would have obvious effects -- less business traffic, shrinking profits and lost jobs. According to a National Restaurant Association study, business marketing meals in 1993 along will total $38 billion. A cut in the deduction to 50 percent would mean the loss of 9.9 percent of those sales and result in the loss of 165,000 foodservice jobs.

Members of Congress need to hear about your specific situations. How much of your sales is dependent on the business marketing meal? How would this proposal affect your operation? Would you need to reduce hours? Shrink your staff? Close your shop altogether?

The association has met several times in recent weeks with other groups who would be hurt by another cut in the business meal deductibility. We've talked with hotels, food distributors, credit-card companies and the small businesspeople who purchase business meals. With their help, the association is in the midst of an immense grass-roots campaign to remove this provision from Clinton's plan.

It will be an uphill fight. Clinton's budget estimates that this provision will generate $16 billion by 1998 -- the fourth-largest revenue producer in his plan. And we still must educate those remaining law-makers who insist on believing in the ridiculously outdated "three-martini lunch" fallacy.

The foodservice industry is not asking for special considerations. We applaud the president's intention to revive the economy and reduce the deficit. But I find it sadly ironic that he would single out foodservice -- an industry that is still smarting from FICA tax on tips and the previous deduction cut -- to again "ante up."

The president is right about one thing. His economic package is "all about jobs." But for the foodservice industry, it's all about losing jobs.

Register your protests concerning the proposed cut in business meal deductibility to your senator in care of U.S. Senate, Washington, D.C. 20510 and to your representative c/o U.S. House, Washington, D.C. 20515. The U.S. Capitol switchboard at (202) 224-3121 can connect you to your appropriate legislators.

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