A Cultural Tax History of the Three-Martini Lunch

The three-martini lunch has been getting a lot of attention lately, thanks mostly to President Trump. For much of the last year, the president has been urging lawmakers to restore the tax deduction for business meals (and libations) to its former glory. And after months of spirited debate, he’s gotten his way, thanks to the recently enacted COVID-19 relief package (H.R. 133).

Not since Jimmy Carter tried to make lunchtime sober again have Americans talked so much about midday tippling and the tax status of a power lunch. The history of this debate is worth examining, especially as it unfolded in 1977 and 1978. Arguments over the business meal deduction reveal the ways tax policy is often embedded in a larger social context.

The decades-long argument over deducting business meal expenses was generally conducted in the familiar terms of tax policy formulation: horizontal equity, vertical equity, and administrative practicality. But at various times, it was also framed in broader cultural terms, touching on the shifting nature of class, gender, religion, and privilege in American society. These changes often came together in a powerful rhetorical trope: the three-martini lunch.

Ancient Libations

The three-martini lunch has presumably been around for a while, since the drink itself dates from the 19th century. As long as diners have been inclined to overindulge, martinis have probably been consumed in threes.

Martini-soaked lunches have been a deductible expense, to one degree or another, since the earliest days of the modern income tax. As Richard Schmalbeck and Jay A. Soled observed, the deduction began like many others, permitted not by specific legislative design but as an element of ordinary and necessary business outlays. (Prior analysis: Tax Notes, May 11, 2009, p. 757.)

That said, the phrase “three-martini lunch,” when used to describe a particular sort of leisurely, sodden business meal, doesn’t seem to have been in active use until the middle of the 20th century. The first reference I can find dates to 1954, when The Atlanta Constitution published a meditation on the various lunch hours enjoyed by different kinds of workers. Along the way, the article acknowledged (indirectly) the tax advantage of a cocktail-laden midday meal.

The three-martini lunch is “enjoyed by the comfortably retired, the indispensable man, and those with generous expense accounts,” the newspaper observed. While skipping lightly over that last category, the paper suggested that the three-martini lunch was a phenomenon confined to “lunchers” living in larger cities who “either work in the financial districts or belong to the lighter-minded of the professions.”

That passing discussion of the three-martini lunch is notable for the implied familiarity of the term: It was clearly in common use already. But it was also new enough to be the subject of amusement in these years. In March 1957 the Chicago Daily Tribune published a sidebar with the following “daffynition”: “High Noon: A three martini lunch.”

During those years, advertisers were starting to use the phrase, too. By 1960 haberdashers up and down the East Coast were running nearly identical ads trumpeting the virtues of new polyester-wool blends, promising that their suits would emerge “immaculate” from the infamous rigors of the now-famous three-martini lunch. Clearly, the martini lunch was already an aspirational touchstone for a specific kind of male professional.

And make no mistake: The three-martini lunch was deeply male. This was not the sort of midday meal consumed by “ladies who lunch.” It was a men’s meal, associated with men’s work in male workplaces.

Such gendered limits were made explicit in an August 1962 editorial for the Detroit Free Press, which claimed to be seeking the “truth about whether women are entitled to equal pay for equal work.” The editors began by suggesting that women didn’t actually perform equal work, instead wasting hours by choosing to “fix their nails and their hair” or sneaking out for some quick shopping. After polling employees in the paper’s own “women’s department,” however, the editors found that many women believed men enjoyed similar, time-wasting perks, including the (in)famous three-martini lunch. (Apparently, such lunches were expensable only for Free Press employees working outside the women’s department.)

In general, however, the three-martini lunch was still in modestly good repute during these midcentury years. It was the subject of light amusement, but it was also the object of more than a little envy. Indeed, it seems fair to describe the luxurious lunch as a coveted mark of success, albeit one reserved for specific male, white, well-educated professionals. Hence its utility as an advertising tag line in those suit advertisements — it sent exactly the right sort of message to exactly the right sort of person with exactly the right sort of disposable income.

The First Attack

And then John F. Kennedy tried to ruin everything.

In the 1930s critics used to call Franklin D. Roosevelt a “traitor to his class,” thanks in no small part to his tax policies. But in at least one important way, JFK had a better claim to the epithet. In 1961 Kennedy took a run at eliminating the tax provision that made lavish business lunches possible, or at least more affordable, for American businesses and their male executives.

In a 1961 message to Congress, JFK urged lawmakers to eliminate the tax deduction for business entertainment, including meals. “In recent years widespread abuses have developed through the use of the expense account,” he wrote. “Too many firms and individuals have devised means of deducting too many personal living expenses as business expenses, thereby charging a large part of their cost to the Federal Government. Indeed, expense account living has become a byword in the American scene.”

Such abuses were a moral failure as well as a fiscal one, but the solution still lay with Congress, Kennedy declared. “This widespread distortion of our business and social structure is largely a creature of the tax system, and the time has come when our tax laws should cease their encouragement of luxury spending as a charge on the Federal treasury,” he wrote. “The slogan — ‘It’s deductible’ — should pass from our scene.”

Kennedy acknowledged that some business entertainment expenses were legitimate. But given the administrative difficulty of separating genuine from pseudo-business expenditures, he proposed simply disallowing them entirely.

“I feel confident that these measures will be welcomed by the American people,” Kennedy wrote. “I am also confident that business firms, now forced to emulate the expense account favors of their competitors, however unsound or uneconomical such practices may be, will welcome the removal of this pressure. These measures will strengthen both our tax structure and the moral fibre of our society.”

Kennedy may have been right about the opinion of the American people toward lavish lunches, but he was wrong about the reaction of the business community. For the most part, Congress rejected his proposed reforms to the entertainment deduction, imposing only modest limits on the deductibility of business meals. For a while longer, the world would remain safe for multi-martini lunches.

As a rhetorical trope, the three-martini lunch didn’t figure prominently in the 1961 debate over limiting the business meals deduction; the political struggle over business entertainment expenses unfolded in more technical terms. But the phrase continued to appear in other contexts, including advertisements and broader cultural discussions of American business and its folkways. And for the most part, this usage remained positive or neutral in its moral implications.

The three-martini lunch, in other words, hadn’t been weaponized during the Kennedy battle over the entertainment deduction — probably because the phenomenon hadn’t yet become a symbol of American moral decline.

On the Ropes Again

By the end of the 1960s, however, the louche world of cocktail-soaked lunches was beginning to lose its luster. Once aspirational, the three-martini lunch was becoming the object of derision and disapproval, thanks to changing cultural mores and declining economic conditions.

“Never tried a three-martini lunch and wouldn’t want to,” huffed one Boston employee of Peat Marwick Mitchell & Co. in a 1974 Boston Globe story on lunchtime athletic workouts. A Chicago Tribune article the same year blamed inflation on declining workplace productivity — and specifically on long lunches. “The company president who indulges in the three-martini lunch adds the cost of his idle time to the product,” said one economist quoted in the piece.

At the same time, the martini lunch was starting to lose some of its gendered exclusivity. “Is stress creating a new kind of problem drinker?” the Boston Globe asked in 1976. “The woman executive who goes out for a three-martini lunch and gulps down evening cocktails to boot. Doctors think so.” Notably, however, the erosion of gender constraints didn’t rescue the status of the business meal from its cultural decline — it simply made women complicit in a practice increasingly viewed as problematic.

Such articles reflected a change in the way Americans were thinking about business behaviors — and business leaders. That change helped set the stage for another serious challenge to the meals deduction, this time mounted by President Carter.

In the fall of 1977, reports began to circulate that Carter would soon unveil his ambitious, long-promised tax reform package. The legislation would include reductions in both corporate and individual taxes, as well as numerous revenue raisers to help limit the cost of the overall package.

Among the rumored sources of added revenue would be a new limit on the business meal deduction. Carter was expected to ask lawmakers to limit the deduction to just 50 percent of the cost of the meal. “The President is known to feel strongly about business fringe benefits, including what he calls the ‘three-martini lunch,’” reported The New York Times on September 5. “He wants to reduce their scope, if nothing else.”

If Carter had his eye on the meal deduction, so did leaders on Capitol Hill. But unlike Carter, they were eager to deflect the president’s hostility. House Ways and Means Committee Chair Al Ullman urged the White House to be cautious when it came to base broadening, warning that overzealous attempts to eliminate preferences might endanger the entire reform package.

Senate Finance Committee Chair Russell B. Long offered a similar warning — and a particular defense of the business meal deduction. “I’ve always been more favorably disposed to expense accounts,” he told The Wall Street Journal. “Entertainment is to the selling business the same thing as fertilizer is to the farming business — it increases the yield.”

Republicans, meanwhile, were also signaling opposition. Charls E. Walker, a former GOP Treasury official, voiced early doubts about the likelihood of curbing the meal deduction. “The business lunch is part and parcel of our business environment,” he said. “I don’t think Congress will tamper with it.”

The Associated Press reported predictable opposition among sales professionals. “Reports that President Carter plans to limit the tax deduction for business lunches seems to be creating a mild case of heartburn in some business quarters,” the AP reported on September 30. Some industry critics blamed Carter individually for his “personal antipathy” to the idea of lunchtime business meetings.

Hotel and restaurant lobbyists, moreover, painted a dire picture of the damage that Carter’s reforms would inflict on their industries. “Their position is that it would ultimately force layoffs and put some popular dining spots out of business as companies cut back on their expense account entertaining,” the AP reported.

Carter’s Crusade

Indeed, many critics suggested that Carter’s personal morality was driving his effort to cap the meal deduction. They often implied that the president was a teetotaler (untrue) and noted that he was a born-again Christian (true). Defenders of the meals deduction typically linked these qualities to the administration’s proposed reform.

“Okay, so Mr. Carter is still a barefoot boy in Gomorrah,” declared Alan Abelson in a tongue-in-cheek 1977 column for The Wall Street Journal. “But he’s gone too far. It’s one thing to cuddle up to the Cubans, hobnob with Congressmen and similar dubious types, stand up for a prominent subordinate who may have strayed from the path of fiscal seemliness. These rate as mere peccadillos in our book, deserving of no more than a mild twit, compared to the staggering enormity of his persistent attack on martinis.”

William F. Buckley Jr., founder of National Review and a syndicated columnist, took a similar view of Carter’s misplaced morality. “One has to conclude that Jimmy Carter’s crusade is, really, against martinis, not against the revenue lost to the government by their deductibility in certain circumstances,” he complained. “References to the ‘three-martini lunch’ are designed not so much to evoke anger at the prospect of a dollar per martini lost in revenue to the government. They are designed to point to a life-style against which all the complicated glands in Carter’s body boil in protest.”

Carter’s critics were underestimating him. He was not simply a puritanical country rube trying to exact revenge on the gin-swilling coastal elites. He was a shrewd politician, trafficking in a specific kind of economic populism while advancing a rather moderate platform of economic and tax reform.

Carter talked frequently about the meal deduction while running for president. “When the President was campaigning in 1976, his ears would ring with cheers when he talked about the working men and women who had their sandwich for lunch while the taxpayers were subsidizing $75 three-martini lunches at 21,” reported Robert Healy in a May 8, 1978, column for The Boston Globe.

After the election, Carter continued to beat this drum in public. “If a working man or woman takes your lunch to work — say, a $1.50 or $2 sandwich and something to drink — or buys it in a restaurant, you can’t mark it off as a business expense,” he said in a Bangor, Maine, speech in February 1978. “But if a salesman or someone else has a very fancy lunch and has a customer with him, then they can mark all of that off, maybe a $25 or $30 lunch, as a business expense.”

The implications of that contrast were clear, both to Carter and to his audience. “I don’t think that is right,” the president told an applauding crowd. “And I think we ought to do away with it.”

Carter also believed that presidential behavior mattered, especially around taxes. During debate over the meal deduction, he warned White House staff that both he and they would follow the rule after its enactment. As The Atlanta Constitution reported:

If Congress Oks the Carter rule, the president will have to live by it, too, says White House counsel Robert Lipshutz, enunciating a live-by-the-sword, die-by-the-sword policy which has been spelled out in an internal memo to all concerned. Congressional approval of the president’s tax proposal would mean Carter would get to deduct from his own income taxes only half the cost of the business lunches he charges to the $50,000 expense account he gets each year along with his $200,000 salary.

Myth or Reality?

Carter insisted that he was unconcerned with martinis, per se. In his Bangor speech, he said his reform was about all sorts of business entertainment, not just “what has been inaccurately called a three-martini lunch.” He later insisted to reporters, “I don’t care how many martinis anyone has with lunch, but I am concerned about who picks up the check.”

But if Carter was unconcerned with the number of martinis consumed at a business lunch, his opponents were not. They recognized that the martini trope was powerful, trading on several decades of shifting cultural norms.

Representatives for the food and beverage industries pushed back on the martini stereotype that Carter claimed to abjure but seemed to be tacitly embracing. “The three-martini lunch is an absolute myth,” complained Jorgen Hansen, general manager of the New York Hilton hotel. “The martini is very rarely served. If people have any alcohol, it’s a glass of wine or something very light.”

Other business leaders echoed this view of the martini as myth. “The so-called two- and three-martini lunch is a gross exaggeration,” insisted Jack I. Criswell, president of Sales and Marketing Executive International, during a November 1977 event reported by the Los Angeles Times. Sam D. Chilcote of the Distilled Spirits Council of the United States agreed. Expense account abuse is “largely a myth,” he said.

John E. O’Toole, president of Foote, Cone & Belding Communications, wrote an October 11, 1977, op-ed for The Baltimore Sun that also dismissed the martini myth. “It may be a folkway of the District of Columbia, but in New York, Chicago, Baltimore, Philadelphia, and the other cities I do business in, people have something like a glass of wine before lunch,” he complained. “Martinis are what our predecessors drank at noon, thereby turning their livers into sponges and precipitating us into their jobs at an early age.”

The National Restaurant Association tried to bring data to a martini fight, releasing a survey suggesting that all cocktails (including martinis) accounted for just 3 percent of beverages ordered at expense account meals. Notably, such drinks were still more popular than beer and wine, according to a November 8, 1977, report in The Washington Post. The most frequently expensed beverages? Coffee, followed by soft drinks, tea, and milk.

Busting the Myth

This curious insistence on attacking martinis says a lot about political rhetoric — and Carter’s skillful use of it. Defenders of the meals deduction were eager to neutralize the three-martini trope, even as they deflected more substantive arguments about the meals deduction itself. They understood that the martini myth was powerful — an effective tool for mobilizing popular opinion around an otherwise arcane change to the tax laws.

Irving Kristol, writing October 18, 1977, in The Wall Street Journal, pointed out that attacks on martinis had a pedigree of sorts. Sen. George McGovern, while running for president, had tried to make two-martini lunches an issue in 1972, albeit without success. “Apparently President Carter is convinced that the Senator underestimated the seriousness of the situation,” Kristol continued. “Or that the extra martini is needed to spur the American people to the proper spirited outrage.” Wink, wink.

Outrage, of course, was the point. And outrage was rooted not simply in the words used to attack the meals deduction, but in how those words resonated with cultural changes underway since the middle of the 20th century.

Humorists are often those most adept when it comes to linking cultural change with political dynamics. And the debate over the meals deduction was no exception. In October 1977 Art Buchwald, author of a regular syndicated column, offered a satirical defense of the meals deduction that neatly captured the cultural shift from aspiration to scorn that surrounded the three-martini lunch. “Having a meal on the expense account is what the American dream is all about,” Buchwald declared. “Everybody should be for it and say, ‘Even if I can’t have a complete tax-deductible lunch, some day, God willing, my children can.’”

Ultimately, however, all the humor and outrage failed to do the trick. For the most part, Congress rejected Carter’s plan to limit the deduction for business entertainment and specifically business meals. It would take almost another decade for lawmakers to get serious about putting limits on the meals deduction, which they finally did in 1986.

The three-martini lunch made a return appearance during the 1980s debate over the deduction, but it didn’t dominate in quite the same way it had during the Carter years; the outrage was lacking. The fight seemed to have gone out of many defenders of the deduction. “Who will die in the last ditch in defense of current permissive rules on the deductibility of ‘business’ meals?” asked columnist George Will in January 1985. “Not fat cats grown fat on too much gin and not enough vermouth.”

The fat cats at The Wall Street Journal, however, were still willing to take one last hit for the team. After Treasury released its plans for tax reform in 1985, the paper’s editorial page took a moment to complain about the meals deduction. “On the pettiness front, Exhibit A is the ‘three-martini lunch,’” the editors wrote. “Jimmy Carter’s heart must have swelled with pride and satisfaction to read Ronald Reagan’s Treasury proclaiming: ‘Lunches are deductible for a business person who eats with clients at an elegant restaurant, but not for a plumber who eats with other workers at a construction site.’”

Will turned out to be the better judge of the cultural (and political) zeitgeist. The meals deduction was headed for a haircut, not least because the cultural cache of luxury lunches was in long-term decline.

By the 1980s few were inclined to argue that business lunches deserved full deductibility, especially given the obvious personal benefit enjoyed by employees attending such events. A 100 percent deduction was hard to justify in terms of tax equity norms, which may go a long way to explaining why Congress imposed a new 50 percent limit.

But perhaps just as important to that new limit was the long-term decline of business lunches as a cultural phenomenon. The world of 1986 was different from the world of 1961. When Kennedy proposed his changes to the meals deduction, he grounded his proposal in terms of tax equity norms. But crucially, the three-martini lunch was still in good repute when Kennedy made that request.

By contrast, when Reagan’s Treasury proposed something similar, the standards of tax equity were still more or less unchanged. But the political and cultural world had changed around them. The three-martini lunch was no longer an aspirational mark of success, but a risible, vaguely corrupt symbol of moral and economic decline.

Perhaps coincidentally — perhaps not — that was the moment when Congress got serious about reining in the meals deduction.