David Frum: Trump is the looter
Over time, Congress scaled back the deduction—first to allow businesses to write off only 50 percent of the cost of business meals (including drinks!) and entertainment, and then, under the tax bill that Trump signed into law in 2017, to remove the tax break for entertainment-specific expenses such as tickets altogether. (Removing the tax break slightly reduced the overall cost of the much larger business tax cuts in the 2017 bill.) Now Trump presumably wants to—at a minimum—undo that limitation, allowing businesses to again deduct entertainment expenses, and perhaps expand the remaining 50 percent deduction the IRS allows on meals and beverages.
Trump is correct to worry about the health of the restaurant industry. To offer one statistic, weekly revenues from independent restaurants using the Toast platform—which provides management and point-of-sale services—dropped by more than 70 percent by late March, and remain about 40 percent below pre-crisis levels; leisure and hospitality jobs, despite an uptick through June, are still down 4.8 million since February.
To be sure, under more normal circumstances, the expanded deduction may very well entice more executives to go to high-end restaurants—that is, the kind that Boulud and Puck own. However, imagining that corporate expense accounts can keep the corner coffee shop, the local bar, or the community theater afloat requires either having a wholly mistaken understanding of what drives consumer spending in the American economy and how Americans are actually faring during this crisis, or simply not caring.
Restaurants, concert halls, theaters, and the like are struggling financially for a very simple reason: People can’t spend money at these places without being at risk of contracting the coronavirus. Many of these businesses are not permitted to open fully or even operate at all, and may not be able to for months. Where restaurants have opened, fear of the virus is enough to discourage people from dining out. According to OpenTable, restaurants that are taking reservations have served more than 40 percent fewer diners every day so far in July, compared with last year. In an industry that already runs on slender profit margins—71 percent of establishments surveyed by the Independent Restaurant Coalition and the James Beard Foundation reported profit margins below 10 percent last year, before the pandemic arrived—many cannot survive unless they are much closer to full capacity.
Pandemic dining: Temperature checks, time limits, and dividers
Any policy solution designed to help restaurants and entertainment venues, and their employees, needs to start with keeping the virus under control—which requires acknowledging that some may need to stay closed or significantly restricted for extended periods of time. It should recognize that the challenge most of these businesses face is maintaining their solvency now, as they rack up debts from unpaid rent, mortgage, or suppliers; and, in turn, provide small businesses with loans or grants. The government should focus on keeping workers who are still on the job safe—through enforced OSHA safety standards and access to sufficient personal protective equipment—and on continuing expanded unemployment benefits for those who are out of work. It should provide support for restaurants and bars that are being forced to change how they do business on the fly, whether that means converting to takeout and outdoor dining or reconfiguring their kitchens to make them safer. And when the pandemic is under enough control to allow people to return to restaurants, concerts, and sports games, the government should direct stimulus efforts to low- and moderate-income families. Their money tends to help the economy more than corporate or high-end tax breaks.