Chicago`s tenants and its expensive restaurants and their employees may be among the losers if Congress passes President Reagan`s tax-reform plan as is, say housing and restaurant industry spokesmen.
Under the changes, rent increases for the average tenant might exceed the tax cuts they would receive because incentive for constructing new apartments would be reduced, driving up the rents for an already tight supply of units, said Scott Slesinger, executive vice president of the National Apartment Association, a trade group based in Washington, D.C.
And expense-account ceilings proposed by the President on entertainment costs would cost business and jobs, say restaurant owners and hotel food and beverage managers.
The Reagan plan would eliminate tax-exempt mortgage revenue bonds, which could significantly affect new apartment construction, especially in the tight Chicago market, where almost all the major new rental projects in the last two years have relied on that financing tool to make them economically feasible.
”I don`t see new construction keeping up its current pace if this becomes law, and that will mean a strong upward pressure on rents,” Slesinger said. ”The President said low-income taxpayers would gain in his plan, but
(considering) the total housing cost, I think they will be net losers.”
The association had previously released a study of the original Treasury Department plan, made public last fall, on which the current Reagan proposals are based; the study said that rents could rise as much as 44 percent.
On expense accounts, the Reagan tax proposal would allow a deduction of only 50 percent of the cost of breakfast, lunch or dinner over a maximum of $10, $15 and $25 respectively.
”You`d be hard pressed to eat at Pizza Hut for that kind of money,”
said George Badonsky, who owns Maxim`s on Astor, Tango, Bastille and George`s. ”If it (the Reagan proposal) passes, it will be devastating to all expense-account restaurants,” he said.
Andrew Kelly, president of the Illinois Restaurant Association, said the changes would penalize small businessmen whose main form of selling is by entertaining prospective customers in restaurants, and also would seriously affect the city`s finer restaurants.
More Top Picks Eye Tracking Exercises You Can Try At Home
”I think in a few years it could decimate the fine-dining industry,”
Kelly said. The Reagan proposals could ”severely impair” 300 to 1,000 restaurants in the Chicago area heavily dependent on expense-account business. The proposed restrictions would especially affect the hotel restaurant and banquet business in tourist and convention areas, both in downtown Chicago and the area around O`Hare International Airport; 75 to 80 percent of hotel business depends on corporate expense accounts, said Matt Brody, director of sales at the Hyatt Regency Woodfield.
Brody anticipates a sharp decrease in the number of meals businessmen charge to their room accounts, now billed directly to their companies. He also sees changes in the hotel banquet business, which at the Hyatt Regency Woodfield averages $35 to $40 a plate.
”I think it will probably change the industry,” Brody said.