Picking Up The Special Interests' Tab

National Review Online: When It Comes To Tax Cuts, Dems Have The Wrong Priorities

(National Review Online)  This column was written by David Freddoso.

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Democrats are all about raising taxes - they have certainly earned the reputation. All three of their leading presidential candidates have promised to raise income taxes, capital-gains taxes, dividend taxes, and the estate tax.

Last week they voted to increase cigarette taxes by 61 cents. Emboldened by their new majority, they have just this year proposed tax increases on small cigars, independent landlords, hedge-fund managers, oil companies, carbon emitters, multinational corporations, and health-care plans.

Democrats have even proposed a “piggyback tax” to pay for the Iraq war, and don’t have any illusions that such a tax would end with the war. More than 100 years after it was established, President Clinton vetoed repeal of the 1898 Spanish-American War tax on phone service. (It was only abolished last year by the Treasury Department.)

Democrats love taxes, and higher taxes are better ones. So isn’t it interesting that they are now the ones trying to revive the three-martini lunch?

The fame of this gluttonous noontime repast dates back to the Carter administration, whose simple-minded zeal for “tax simplification” usually involved tax increases instead of cuts. Business owners, the complaint went, were “cheating the government” by writing off massive business lunch tabs (which in that civilized age included copious quantities of alcohol).

Although Carter never succeeded in taxing the “three martini lunch,” his successor, President Reagan, went along with a Democratic Congress to limit this deduction to 80 percent in the 1986 round of tax reform. Prior to that, the allowable write-off for qualified business meals and entertainment had been 100 percent. In 1993, as part of President Clinton’s tax hike, the allowable deduction was reduced again to 50 percent - much to the dismay of the restaurant industry.

Now an obscure Senate bill (S. 58) seeks to repeal the Clinton tax-hike on business meals and entertainment. Surprisingly, the return of the three-martini lunch is being proposed by Democrats. Sen. Daniel Inouye is sponsoring the bill, and its companion House bill is sponsored by his colleague in the Hawaiian delegation, Rep. Neil Abercrombie. The Hawaiian connection is not hard to figure out - tourism and hospitality are the largest industries in the Aloha State, accounting for nearly a quarter of its economy. It is a very popular location for business conferences, which qualify for the meals and entertainment write-off. This tax cut would boost Hawaiian restaurants and hotels, perhaps even giving them some room to raise their prices and adding as much as $108 million to the state’s annual economy, according to the National Restaurant Association.

It goes without saying that no conservative could possibly oppose such a tax cut. Yet conservatives also buy into the idea that every change in the tax code creates an incentive of some kind, and therefore some tax cuts are better than others. This provision would allow business owners to eat and drink more freely with their clients - an unmistakable good, and certainly a good thing for the restaurant, sports, and entertainment industries.

By contrast, however, a cut to income, capital gains, or corporate tax rates benefits everyone by encouraging economic growth. When the government siphons off less of the nation’s economic production, this encourages Americans to invest more freely in their businesses or in the financial markets - both of which ultimately create all of the jobs Americans hold in the private sector. When top marginal rates are reduced, there is less disincentive to expand further and take on more employees. No martini deduction could ever do this so effectively.

“We wouldn’t necessarily oppose this bill,” said one GOP aide on Capitol Hill. “But it’s a clear case of misplaced priorities when Democrats worry about Hawaiian conferences while Middle Americans deal with higher mortgage rates and the higher taxes they’re planning to pass.”

Along the same lines, Rep. Earl Pomeroy, D-N.D., is sponsoring a bipartisan bill in the House with Rep. Phil English, R-Pa., to cut the excise tax on beer from $18 to $9 per barrel. (North Dakota is the nation’s largest barley producing state, producing 40 percent of the national crop in 2003.)

Whether it’s about martinis, beer, or solar energy, the Democrats’ approach to taxes is simple: It all depends on who benefits. The government can use a carrot to pick winners and losers among special interests such as the beer, restaurant and oil industries. Then it can use a stick on all the rest of us - investors and wage earners. For Democrats, tax cuts are for special interests, not general economic growth or the common good.

These tiny Democratic tax cuts are probably going nowhere in this Congress, although there is always the off-chance that they will be included in next year’s Alternative Minimum Tax package.

But it is wonderful to see a few Democrats trying to decrease taxes for a few people. Wouldn’t it be even better if they’d at least stop trying to raise taxes on everyone else to make up for it?

[votepaul12]

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[civiltongue]

Xlib: "Wrong nedhoffer-the 1994 Republican congress paid the debt."

I wonder if Xlib understands that he (or she) and I and all other taxpayers actually paid the debt, not the Republican Congress, whose individual $ contributions to the debt reduction effort were miniscule. We need to understand that we are in this together, whether folks like Xlib like it or not. The 1994 Congress, if I remember correctly, shut the government down, at great additional cost to us all.

[balto_babs]

"This provision would allow business owners to eat and drink more freely with their clients - an unmistakable good"

NRO you have got to be kidding, not vetoing SCHIP would be an UNMISTAKABLE GOOD.

Allowing Senate bill (S. 58) to repeal the tax-hike on business meals will just allow the Special Interests and Lobbyists to buy the votes of our elected officials at taxpayer expense.

[xlib]

Wrong nedhoffer-the 1994 Republican congress paid the debt.

[xlib]

ov442-your question/attack is so typical of the close minded left. See, this is cbs''s attempt to present another point of view. Hopefully you realize that there are other views on issues, political and non-political. So, until your facist party does away with anything other than a lib/socialist view, deal with it. You also have the right to not read it or discount what is presented. But no, typical of the left, you attack.
And do enjoy the huge tax increase your party is sneaking onto the American taxpayer.

[ov442]

Why does anyone republish puke from national review?
they dont review anything.
100% of the time, they take anything in the political news they can find, concentrate really really really hard to spin it against the democrats, and for the republicans without bothering to check facts, and omitting key points that would dislodge their accusations, and then level them as some kind of editorial discourse instead. basically a complete scam run by GOP donors.

[imnho]

The concept of not rasing taxes to sastain the war will one day prove to be untenable. It also leads to a major disconnect between the public and the miltary personnel. If we are at war then thenation should be on a war footing.

I also think that trickle down economics winds up raining long term problems on the middle class. If taxes are to be cut then the budget needs to be cut to avoid overdrafts. Just blindly cutting taxes generated years of problems in the 80''s.

[johnshaft4]

How else you nut job, Christian Republicans going to pay for Bush/Cheney & Co''s failed Iraqi oil occupation? HINT: It ain''t coming from oil revenue as promised. Bush/Cheney are considered clowns in the oil industry (where I work). Bush''s "Spectrem 7" and "Harken Energy" are the source of laughingstock material. Because these idiots don''t have the smarts to be successful wildcatters, they have to resort to stealing it. George Bush could not find a drop of oil under a car; nor a quart of oil in a filling station.

[wogerwabbit]

I''m thoroughly convinced that the republicans believe their own lies and are now just totally witless husks living off their past glories. To claim to be the party of fiscal responsibility after the six and a half year spending binge they''ve been on is beyond madness. And I''m utterly amazed that they expect us to continue to sit idly by as they plunder our treasury, get our troops killed and enrich their already rich friends, like the good little sheep they consider us to be. Unless Bush pulls a coup de etat, the republicans are in for one rude awakening in 2008. I almost feel sorry for them........ nah!

[redhoffer]

Thanks NRO.

Repubbers want 150 BILLION dollars for the war no one wants

Dems want less than 30 billion dollars for domestic issues.

Yes, democrats believe in taxing for what you spend, the repubbers just "spend and spend".

What sux is thatthese idiot repubbers will force the next deomcrat administration to fix all the financial disasters they created and then will whine about it.

Honestly, how out of touch is america that a high percentage of the public buys this NRO junk? We know they dont, they just want keep spreading their hate on ***, pro-choicers, and the soldiers. Thats the only thing that makes sense, cuz this article didnt.

Reagan made debt.
Bush I made debt.

Clinton paid the debt

Bush 2 made more debt

Repubbers fiscal nightmare, just clueless on basic fiscal responsibility

[civiltongue]

So, just how does the author of this drivel plan to pay for the cost of the war and the over-budget spending of the current administration? What sort of economic growth would it take, at the reduced tax rate that he does support, to pay for that excess? And at what cost to the environment?

"This provision would allow business owners to eat and drink more freely with their clients - an unmistakable good . . . " I would love to seee him produce just one piece of data that supports this absurd claim. During the course of an expensive meal is not exactly the best environment in which to conduct business - though it is great for schmoozing, which is, in my opinion and experience, a form of bribery or graft, subjects with which most politicians of any stripe are familiar with - Republican included. Just ask Duke.