GOP plan would boost deduction for business meals

Senate Republicans’ proposed coronavirus package unveiled Monday would increase the deduction for business meals, a priority for President Trump.

Under a section of the package offered by Sen. Tim Scott (R-S.C.), taxpayers would be able to deduct 100 percent of the costs of business meals through the end of the year, up from 50 percent under current law, if the food and beverages are from restaurants. 

Ahead of the measure’s release, White House economic adviser Larry Kudlow said in an interview with Fox Business Network the package would include “increased business deductions for meals and entertainment.” However, Scott’s, provision focuses specifically on meals and does not apply to entertainment expenses.

Trump pushed to increase deductions for business meals earlier this year after speaking with well-known chef Wolfgang Puck.

“This will bring restaurants, and everything related, back – and stronger than ever,” Trump tweeted in April.

Scott said that his proposal would help restaurants and their employees.

The proposal “will lead to more customers, more opportunities for hardworking waitstaff and kitchen staff, and much needed revenue for small businesses across the country,” he said in a statement. 

But the idea of increasing the business meals deduction has been criticized by Democratic lawmakers as well as tax-policy experts across the ideological spectrum.

Rep. Lloyd Doggett (D-Texas), a senior member of the House Ways and Means Committee, said in a statement Monday that a provision to expand deductions for meals and entertainment would be “the latest example of a tax provision tailor-made to benefit the Trump family finding its way into major tax legislation.”

Kyle Pomerleau, a resident fellow at the right-leaning American Enterprise Institute, wrote in a blog post earlier this month that expanding deductions for meals and entertainment would be “poorly targeted in the context of COVID-19,” because many Americans are uncomfortable eating in restaurants due to the virus.

“Ultimately, the most effective way to help the restaurant and entertainment industries is to get the virus under control,” he wrote.  

The business-meals provision is one of several tax-related parts of Republican package. Most of the tax provisions were unveiled by Senate Finance Committee Chairman Chuck Grassley (R-Iowa).

The package would provide for a second round of direct payments that would generally similar in size and scope to the payments Congress had authorized in legislation passed in March. Unlike the first round, in which only dependent children under 17 qualified for payments of $500, the GOP package would allow dependents to be eligible for a $500 payment regardless of their age.

The plan would also expand the employee retention tax credit (ERTC) that Congress created in the law enacted in March, increasing the credit amount and making more businesses eligible to use the credit. There has been bipartisan support for expanding the ERTC, making it likely that some type of expansion of the credit will be a part of a package that’s negotiated between Republicans and Democrats.

The package would expand the existing work opportunity tax credit, so that businesses could receive the credit if they hire workers in 2020 who had been receiving unemployment benefits prior to being hired.

The legislation would create a payroll tax credit for 50 percent of employers’ expenses relating to protecting their employees from COVID-19, such as personal protective equipment and cleaning supplies. House Republicans and retail groups have also expressed support for such a tax credit.

Additionally, the legislation would standardize rules on when employees who perform work in multiple states can be subject to taxes in states other than their state of residence.

– updated at 7 p.m.