Representatives from the hotel and restaurant industry yesterday generally expressed disapproval of the Reagan tax proposal, which would disallow many business deductions for entertainment and travel expenses.
"The administration's proposal to limit the deduction on business marketing meals is totally unacceptable to the restaurant industry," said Ted J. Balestreri, president of the National Restaurant Association.
Balestreri said that meals purchased in restaurants for potential clients or customers in order to sell goods or services are a "legitimate cost of doing business."
Under the president's plan, meal deductions would be sharply reduced although not by as much as the Treasury Department had originally proposed. While the original proposal put a cap of $10 on breakfast, $15 for lunch and $25 for dinner, the new plan simply puts a cap of $25 on each meal. Only 50 percent of the amount over $25 could be deducted.
"As the law continues to recognize the deductability of business expenses, there is no logical rationale for capping or limiting the deduction for business marketing meal expenditures," Balestreri said.
In 1985, business meals will generate $30 billion in restaurant sales, according to industry estimates. "Loss of a significant percentage of those sales will devastate our industry, which operates on relatively narrow profits margins," said Balestreri, who also predicted that up to 100,000 food service employes would lose their jobs.
The hotel industry provided 1.1 million jobs and had revenue of $33.3 billlion last year, with nearly 40 percent of that accounted for by business customers, according to the American Hotel and Motel Association.
Al McDermott, who represents the association in Washington, said, "We think the overall picture, in all likelihood, will put tens of thousands of hotel jobs in jeopardy.
McDermott said that the present law gives the IRS sufficient authority to control any possible abuses because "it denies any deductiblity of expenses that are lavish and extravagant. The IRS has failed to enforce that law, and we encourage them to do it rather than come up with this type of proposal."
"The president promised many, if not all, Americans in his TV presidential address that he would lower their taxes," said McDermott. "What he failed to say, however, is that the person receiving lower taxes had a good chance of first losing his job."
Under the president's plan, no deduction would be allowed for business travel by ocean liner or cruise ship in excess of the cost of otherwise available business transportation. No deduction would be allowed for expenses of conventions, seminars or other meetings held aboard cruise ships. No deduction would be allowed for travel as a form of education.
Marriott Corp. spokesman Terry Souers said that "at first glance, it looks as if it's an improvement over some of the proposals that have been put forth previously and it looks as if on the whole it might be beneficial to our corporation." He said Marriott is concerned about proposed limitations on deductions for business meals.
Not everyone was critical of the proposal. "The harsh reality is that business will be conducted as usual and corporations will pass along the additional costs of doing business to the public or their customers," said David Leibowitz, a financial analyst with American Securities Corp. "I don't see a major impact. . . . One might not be quite as lavish with the restaurant selection or the food and beverage selection. But the concept of dining out with clients or entertaining clients will not end because of the proposed changes in the tax package."