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As for the wide variation in state taxing levels, Cuomo argues that those with high ones have "disproportionate need," including large numbers of poor and elderly. According to Joseph Minarik, a senior research associate at the Urban Institute who testified on the loss of deductibility before the Joint Economic Committee last week, it is these least-powerful groups who in the end would pay most heavily for repeal. Reason: as states and cities cut expenses under pressure from taxpayers, the have-nots would lose public services. Finally, opponents of disallowance point out that more taxpayers (33 million) claim deductions for state and local taxes than for home mortgage payments (24.5 million), which remain deductible under Reagan's plan. That hardly makes the deduction for state and local levies an elitist provision, its supporters argue.
Even though homeowners across the country would lose their property tax deduction, it is only in seven states (New York, New Jersey, Massachusetts, Michigan, Wisconsin, Minnesota and California) that opposition to the loss of local deductibility is running high. The Administration dismisses these protests as being equivalent to the howls of special interests. Appearing on Good Morning, America, White House Chief of Staff Donald Regan declared, "It's just the wealthy people in New York" who would be affected. Added Baker: "It's a subsidy that we don't think is fair."
Reagan's proposals for business entertainment and travel expenses center on the corporate bete noire of previous Administrations, the celebrated (and all but fictitious) three-martini lunch.* The tax plan would limit the deduction for any business meal to $25 per person, plus half of anything in excess of that amount. The fully deductible $25 would not cover the cost of many a catered buffet cocktail party, let alone lunch or dinner at a first-class restaurant. Even so, it is far less draconian than the original Treasury Department plan, which specified per person limits of $10 for breakfast, $15 for lunch and $25 for dinner.
For business entertaining beyond the dining table, the Administration's knife was much sharper. Barred completely as deductible business expenses would be the cost of tickets to sporting events and the theater, membership fees in country clubs and hunting and fishing lodges, and outlays for executive hospitality toys like yachts. Expenses for travel aboard cruise ships beyond ordinary airfare for the same trip would be disallowed unless medically required, as would conventions and seminars conducted at sea. Finally, no one would be able to claim travel costs as educational expenses, a provision evidently aimed at teachers who go abroad during summer vacations or sabbaticals. Write-offs for other travel expenses, including hotel accommodations and premium airfares, would not be affected so long as they are "reasonable and necessary."
The new restrictions are not expected to produce large amounts of additional