The “Three-Martini Lunch” is a derisive term historically used to describe a lavish business lunch where the attendees might consume up to three martinis. The practice became emblematic of business extravagance and was particularly associated with the mid-20th century corporate culture.
Historical Context
The term gained popularity post-World War II, during a period of economic expansion in the United States when corporate leaders often met for prolonged, boozy lunches. This culture was reflected in numerous media portrayals and became a metaphor for waste and excess in corporate spending.
Tax Implications
In the United States, the cost of these lunches was typically claimed as tax-deductible business expenses. However, the opulence associated with the three-martini lunch led to scrutiny and criticism. This culminated in the 1993 Tax Act, which limited the deductibility:
Notable Changes and Regulations
Tax Act of 1993
The 1993 Tax Act specifically aimed to curb the potential for abuse of business meal deductions. The key provisions included:
- Restriction on Deduction: The act established that only 50% of the cost of business meals could be deducted for tax purposes.
- Documentation: Required more rigorous documentation to substantiate the business nature of the meal expense.
Impact on Business Culture
The change in the tax code was intended to discourage excessive spending on lavish lunches and align corporate spending with more frugal and ethical practices. Businesses had to adapt by justifying the relevance and necessity of such expenses with clear documentation to claim deductions.
Examples and Modern-Day Relevance
Example Scenario
Consider a corporate executive who takes a client out for a lunch costing $200. Under pre-1993 rules, the entire $200 could be expensed as a business deduction. Under the new rules post-1993, only $100 can be deducted.
Modern Context
Today, while the tradition of the three-martini lunch is far less common, especially given the greater focus on health and efficiency, the term still resonates as a critique of unnecessary business extravagance and a reminder of past corporate excesses.
Comparisons and Related Terms
Related Terms
- Expense Account: An account set up by a company to reimburse employees for business-related expenses.
- Per Diem: A daily allowance for business travel expenses.
- Fringe Benefits: Additional benefits supplementing an employee’s salary, which may include meals and entertainment.
Frequently Asked Questions
Why was the three-martini lunch criticized?
The three-martini lunch was criticized for representing excessive and often unnecessary business expenditures that were subsidized by tax deductions, at a cost to taxpayers.
How does the current tax code treat business meals?
As of the latest updates, the tax code typically allows for a 50% deduction of meal expenses, provided they meet specific criteria and are properly documented.
References
- IRS Publication 463 - Travel, Entertainment, Gift, and Car Expenses.
- “Three-Martini Lunch” article, Business Historical Society Journal.
- 1993 Tax Act provisions.
Summary
The three-martini lunch stands as a historical illustration of the lavish business culture prevalent in the mid-20th century, leading to significant changes in tax legislation aimed at curbing such extravagance. Its legacy continues to serve as a cultural touchstone and a point of reference in discussions of corporate ethics and spending practices.
