AT one time, companies could deduct T and E expenses for any occasion "conducive to a business discussion," whether or not any such discussion took place.
After the regulations were changed to require that entertainment be "directly related" to business activity, the national tax practice director for Touche Ross advised executives that "it may be necessary to schedule significant business meetings before or after [an event] to meet these requirements."
"What?" the bond traders moan, "We have to discuss business at a business lunch? The injustice of it all!"
Eliminating T and E deductions ought to be the perfect issue for Democrats. It reflects their professed support for the common people against the greedy. Former president John F. Kennedy '40 used the issue to his advantage. So did former president Jimmy Carter, who campaigned against the injustice of bankers deducting expensive lunches when a "truck driver cannot deduct his $1.50 sandwich."
DESPITE the obvious populist appeal of the issue, both Kennedy and Carter encountered little enthusiasm among congressional Democrats for limiting the deduction. And when former Senator Gary Hart (D-Col.) proposed cutting the deduction by 30 percent and using the savings to restore Reagan's cuts in the school-lunch program, he found only 30 votes in the Senate.
In the 1986 tax reform bill, a measure that eliminated dozens of cherished tax breaks altogether, Congress limited T and E deductions to 80 percent of their cost. That is a step in the right direction, but it isn't nearly enough. Wealthy investment bankers do not deserve any government handout at all.
Democrats should jump on this potent issue before the Republicans claim it. Under Reagan, both the Treasury Department and the Office of Management and Budget proposed limiting T and E deductions. If Democrats are serious about favoring the working class and opposing corporate free-loaders, they should eliminate the T and E deduction entirely.
This is the third in an eight-part occasional series on the taxpayer-financed perks enjoyed by middle- and upper-class Americans.