(4 of 5)
revenue: the Treasury Department estimates that they will raise only about $2 billion annually by 1990, from both individual and corporate returns. But the Administration contends that the changes are justified because nothing has served more effectively to undermine public confidence in the tax system than the high visibility of extravagant business entertainment. Defending the cap on meal expenses, the Treasury Department contended that only 2.5% of all meals served by U.S. restaurants cost more than $19. Stated a summary of the tax plan: "Placing a limit on the deductibility of business meals would eliminate the extreme cases of abuse -- those that offend the average taxpayer the most."
Owners and employees of the $30 billion restaurant industry were quick to disagree. Calling the Reagan proposal "totally unacceptable," National Restaurant Association President Ted Balestreri declared, "Meals purchased in restaurants for potential clients or customers in order to sell goods or services are a legitimate cost of doing business." The Reagan cutoff, he claimed, puts restaurants at an unfair disadvantage in respect to other forms of fully deductible "promotional expenditures," such as advertising. The result, he predicted, perhaps with some extravagance of his own, could be the loss of as many as 100,000 jobs. Warned Chicago Restaurateur Rich Melman, whose eateries include the Pump Room: "A lot of fine restaurants are going to suffer."
The threat to professional sports, which would not be even partly deductible, is potentially even more severe. By Administration estimates, businesses buy nearly one in three of the 45 million big league baseball tickets sold annually and more than half of the 12 million professional hockey admissions. "The Reagan plan could be devastating," said William Wirtz, president of the National Hockey League's Chicago Black Hawks. "All professional leagues are struggling to keep player salaries under control and costs down. Now ticket prices will probably have to rise (to make up for lost revenue), and the fan will suffer."
There was also gloom in Manhattan's Broadway theater district, where business entertainment accounts for close to 20% of ticket sales. Said Harvey Sabinson, executive director of the League of American Theaters and Producers: "If we were to lose a great percentage of those sales, that could close some shows that are running marginally."
Others were not sure that the consequences of the new measures would be quite so dire as predicted. Said Tex Schramm, president of the Dallas Cowboys: "If an $18 sports ticket is a good way for businesses to entertain, they're not going to stop because they cannot write off the cost of the ticket." Moreover, some of the regulations may prove difficult to enforce. Some business hosts, for example, might seek to raise the $25 meal deduction by claiming a few phantom guests.