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Restaurant Industry: 100,000 Workers Will Lose Jobs

May 30, 1985

Undated (AP) _ Restaurant industry insiders are unhappy with President Reagan’s proposal to limit tax deductions on business meals, but analysts predict the changes will not have a large impact.

The president’s tax-overhaul plan would let businesses deduct the full cost of business-related meals and drinks up to $25 per meal per person. They could then deduct only half the cost above that threshold.

Present law permits deduction of reasonable costs of meals and entertainment with a business purpose.

″This unjustifiable intrusion of government into business will hit our business hard,″ Ted Balestreri, president of the National Restaurant Association in Washington, said Wednesday.

Up to 100,000 food-service employees would lose their jobs under the president’s proposal, he predicted.

″Meals purchased in restaurants for potential clients or customers in order to sell goods or services is a legitimate cost of doing business,″ Balestreri said. ″As long as the law continues to recognize the deductibility of business expenses, there is no logical rational for capping, limiting or reducing the deduction.″

Such business meals will generate $30 billion in restaurant sales in 1985, he said. There are 560,000 food-service outlets in this country, the association says.

William Giery, executive secretary of the Foodservice and Lodging Institute, another Washington-based trade group, said: ″We’re very much concerned with it. It’s a better proposal, from the industry standpoint, than the first proposal. But there is still a great deal of concern particularly with possibility of lost jobs.″

The Treasury Department earlier had suggested limiting the deductions to $10 for breakfast, $15 for lunch and $25 for dinner.

Jack Kenneally, general vice president for the Hotel Employees and Restaurant Employees Union, AFL-CIO, in Washington, said the latest proposal would have a ″devastating impact″ on workers who depend heavily on tips for their income.

″The gratuity portion is the most vulnerable,″ said Kenneally, whose union has 400,000 members.

Sheldon Tannen, president of the 21 Club in New York, said, ″We have a very negative reaction to the president’s proposal.″

Tannen said he could not elaborate immediately because it was lunchtime and he joked that he was busy making sure people were seated ″while they still can afford to come here.″

Donald Lupa, an analyst who follows the restaurant industry for the investment firm Duff & Phelps Inc. in Chicago, said: ″For the upscale part of the industry, certainly that’s going to have some problems. Essentially the problems would be in the large metropolitan areas like New York, Chicago, Los Angeles and Miami.″

″Obviously, what they’re going to have to do is realign their menus,″ Lupa said.

But the analyst added: ″Certainly that’s a small part of the industry. I don’t think the industry in total is going to lose out. I don’t see that much in the way of repercussions.″

The costs of business meals vary considerably, Lupa said.

At the 21 Club, where martinis cost $5.15 each, Tannen said the average customer spends $60 for lunch.

Several blocks away, at Kenny’s Steak Pub, patrons spend about $15, including tax and tip, hostess Mary Kenney said.

A spot check with several major corporations found them unwilling or unable to reveal the amount they spend a year on business lunches.

Dick Gray, a spokesman for American Telephone & Telegraph Co. in New York, said, ″The employees are already conscious to hold the line on all expenses regardless of what the tax consequences are.″

Jim McCrory, a spokesman for Borden Inc., the New York-based food company, said, ″They keep fairly tight control on all expenses now and nobody wants to speculate on this until this thing is actually passed.″

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