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White House: Relief bill to include more tax breaks for 'meals and entertainment'

Trump and the GOP let expanded unemployment benefits expire, but they think more tax deductions for businesses are needed.

By Emily Singer - July 27, 2020
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White House chief economic adviser Larry Kudlow

Larry Kudlow, Donald Trump’s top economic adviser, previewed some of the provisions in the GOP’s soon-to-be-released coronavirus relief package during an interview with Fox Business on Monday, saying that aside from scaling back unemployment payments to laid-off workers, Republicans also want to give more tax breaks to businesses.

“There will be increased business deductions for meals and entertainment,” Kudlow, the director of the National Economic Council, said.

Trump has been pushing for giving businesses greater ability to deduct meal and entertainment costs for months, saying it’s a possible way to help struggling industries.

Before Republicans passed their tax cut in 2017, business owners could fully deduct the cost of a meal if that meal was related to conducting business —  wining and dining a prospective client, for example. However, in the updated tax law, Republicans cut that deduction in half, allowing businesses to deduct just 50% of the cost of those meals.

Even more, the tax law cut the ability for businesses to deduct entertainment expenses, such as taking a client to a professional sporting event. Before the tax law, those entertainment expenses were 50% deductible.

“We’re going to go to deductibility so that companies can send people to restaurants. I think it’ll have a tremendous impact and maybe keep them open,” Trump said on March 29.

Trump brought up the proposal again in May at a roundtable with business leaders.

“Restore the restaurant deduction to help jobless restaurant workers,” Trump said. “So if a company pays or somebody pays, they get a deduction. That’s going to create a tremendous amount of business. I think you’re going to have to open a lot of additional restaurants in this country. I think it’s, frankly, more important than even the other things we’re talking about.”

Experts, however, say restoring this tax deduction won’t help the flailing economy, where 11.1% of workers remain unemployed and with long-term unemployment growing. Not to mention, restaurants are still under heavy restrictions, as indoor dining has been found to help spread the virus.

“Not only has the business meal deduction been a favorite tool for tax avoidance and thus dubious tax policy, but restoring it now seems especially pointless,” Howard Gleckman, a senior fellow at the Tax Policy Center, wrote in a May 7 post about Trump calling for the restoration of the deduction.

Gleckman said that while the restaurant industry could use help, the tax deduction won’t incentivize business people to go out to eat when a pandemic is raging.

“Would you be any more likely to host a business dinner tonight if you could deduct the full cost, rather than half? Would anyone attend? Seems unlikely,” he wrote.

Meanwhile, the Senate GOP coronavirus bill Kudlow was previewing also slashes an added unemployment insurance payment laid-off workers have been receiving by two-thirds — from $600 per week to $200 per week.

Economists say those payments have been critical to keeping the economy from experiencing even worse damage, as it helps Americans continue buying consumer goods to keep the economy humming. Without that cash, laid-off workers will not only have less disposable income, but may be unable to pay for basic necessities such as rent, mortgage payments, or putting food on the table.

An Economic Policy Institute study found that cutting the benefit to $200 per week would lead to 3.4 million job losses.

“The big constraint on economic growth right now is the spread of the coronavirus. If we allow the $600 supplement to lapse, another huge constraint on growth will be imposed — collapsing incomes for the tens of millions of U.S. families that had to rely on these benefits in recent months,” EPI’s Josh Bivens wrote.

The bill Congress passed in March creating the payments included a July 31 expiration. House Democrats passed another bill in May that would extend the $600 weekly unemployment payments through the rest of the year. But Senate Republicans refused to take the Democratic bill up, dragging their feet so long that the payments have now expired.

“It is simply unacceptable that Republicans have had this entire time to reach consensus among themselves and continue to flail,” House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer wrote in a joint statement on Friday. “Time is of the essence and lives are being lost.”

Published with permission of The American Independent Foundation.


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