That Expense-Account Living

"The time has come when our tax laws should cease to encourage luxury spending as a charge on the federal treasury," said Treasury Secretary Douglas Dillon last week, testifying before the House Ways and Means Committee. That cherished lubricant of modern business, the deductible expense account, was the object of the Administration's tax raisers, who hope to pick up $250 million a year on no-longer-deductible third martinis and seats on the aisle.

Instead Dillon proposed a private enterprise version of the Government's rigid per diem system. Since traveling civil servants get only $12 a day for expenses, explained Dillon (himself a millionaire stockbroker), businessmen should learn to subsist--at least for tax purposes--on a $30 daily allowance. He was prepared to concede a daily allowance ($4 to $7 per guest) for "modest" business lunches, but coldly proposed eliminating all deductions for expenses incurred for business entertaining "at such functions as parties, nightclubs, theaters, country clubs and fishing trips."

To back up his case for these "realistic recommendations," Dillon cited some of the more zany abuses of the expense-account society. He told of undertakers who deducted $35,000 for operating a yacht on grounds that clergymen and others connected with their business had to be entertained in a more cheery atmosphere than that afforded by a mortuary, of a company that got a $16,943 business deduction for "use of yacht to demonstrate to customers the value of sneakers with nonskid soles."

The well-upholstered owners of well-upholstered restaurants wailed that they would be put out of business. But many businessmen agree that expense-account living (particularly by others) has got completely out of hand--partly, as Dillon concedes, because leniencies in the tax laws have encouraged companies to use expense accounts as weapons of competition or inducements for highly taxed executives.

Dillon's plan would still let business spend what it has to in order to get business, but without being able to claim as much tax credit. His Spartan suggestions, however, did not appeal much to businessmen--despite the fact that he added that the Kennedy Administration hopes to present to Congress next year a program of income tax relief for individuals, including those in high tax brackets. Snorted Judson Sayre, chairman of the Norge Division of Borg-Warner: "You can't run businessmen like the Army. How can you put executives on per diem? I can't travel on $30 a day unless I eat only Metrecal or the Government stops subsidizing elephants in Laos and starts subsidizing hotels for executives in the big cities."

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