"Three-martini lunch" tax break should be repealed, lawmakers say
The "three-martini lunch" tax break was signed into law in December by former President Donald Trump, who said it would help revive pandemic-stricken restaurants. Less than half a year later, a bipartisan effort wants to revoke that tax break, saying the billions in lost revenue raised should be used to support child care instead.
The tax break stirred controversy when it was passed, with Senator Bernie Sanders, an independent from Vermont, calling the deduction "corporate socialism for the rich." The idea behind the tax break was to help restaurants at a time when many remained shuttered or at lower capacity due to the pandemic. The change allowed businesses to entirely write off business meals, compared with a 50% write off for work-related meal before that.
The Three Martini Lunch Tax Break encourages business lunches that appropriately follow guidelines to be written off as 100% deductible on tax returns! Consult with your tax advisor about this savings strategy @DiLucciCPA #savingsstrategy #100%deductible pic.twitter.com/yGEcCWVpCm
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It was an issue that found a champion with Trump, who owns hotels and restaurants such as the Trump Grill in New York City and claimed the tax break would "really bring life back to the restaurants." But critics pointed out that the tax break would largely help reduce taxes for business executives, but not necessarily shore up the restaurants that were struggling the most during the pandemic.
"The full 'three martini lunch deduction' is not the most effective use of taxpayer dollars, and it's time we repurpose these funds," said Representative Peter Meijer, a Republican from Michigan who co-sponsored the bill with Representative Suzanne Bonamici, a Democrat from Oregon, in a statement.
The full business meal deduction will result in $5 billion in foregone tax revenue in 2022 and 2023, according to the Joint Committee on Taxation. By repealing the full business meal write-off, that $5 billion could be reallocated to child care, Bonamici suggested in introducing the bill on Friday.
"We should be using federal dollars to meet the needs of working families, not for a needless tax break," she said in the statement.
To be sure, plenty of bills are introduced in Congress and never progress from there. The effort to repeal the tax deduction comes at a time when restaurants are still regaining their footing, although among their top issues are finding workers to meet surging demand from customers as the U.S. vaccination rate recently topped 40%.
At the same time, the Biden administration is pushing for more support of child care and other benefits that would help families return to the workforce. President Joe Biden's American Families Plan would provide support for child care, ensuring that middle-class families pay no more than 7% of their income to child care, for instance.