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<p>[quote user="Falcon48"]</p> <p> </p> <blockquote> <div><img src="/TRCCS/Themes/trc/images/icon-quote.gif" /> <strong>Sam1:</strong></div> <div> <p> </p> <p> </p> <blockquote> <div><img src="/TRCCS/Themes/trc/images/icon-quote.gif" /> ". </div> </blockquote> <p> </p> <p>The issue is whether the premium fare that is paid by someone traveling on an expense account is a subsidy to the carrier or vendor.  As I noted, it applies equally to any mode of transport, including first class, business class, etc.</p> <p>Are high priced meals eaten by people on an expense account a subsidy for the restaurants that serve them.  The IRS thinks so.  It is the reason a business cannot deduct more than half of the cost of the meal as a legitimate business expense.  And there is an upper limit on the cost of the meal.  It is the reason why all outside of the box travel, meal, and entertainment expenses are constrained by the tax code.</p> <p>The Acela service probably would not be possible without people riding on expense accounts.  On the other hand, if the first class and business cabins on the jet liner went away, the airlines would probably do quite nicely, since there would still be plenty of people to fill the seats in the back.  Come to think of it, on Southwest, Jet Blue, etc., there is no first and business classes.  And they appear to be doing OK. </p> <p>Clearly, what is a subsidy depends on one's views.  As I mentioned, most people really get torqued up when I tell them that the ability to deduct the mortgage interest, property taxes, and capital gains on their homestead on Schedule A and D is really a subsidy.  I guess it depends on whose Ox is being gored.  </p> <div style="clear:both;"></div> <p> </p> </div> </blockquote> <p>  </p> <p> </p> <p>You are confusing two entirely different issues</p> <p>The question of whether a user fee a business traveller pays to the provider of a service (whether rail transportation or hotel accomodations) is tax deductible has NOTHING whatever to do with the issue of whether the fee is a "subsidy" to the service PROVIDER.  The reason IRS does not allow some types or amounts of business expenses to be deducted isn't because IRS considers them to be "subsidies" to the PROVIDERS of the goods or services involved.  It's because IRS does not consider the expenses to be reasonably necessary for the TAXPAYER (that is, the business which INCURRED the expense) to generate its own income, and thus does not allow the TAXPAYER to use the expenses to reduce its taxes.   </p> <p>The other types of tax deductions you mention (mortgage, property taxes, etc) also have NOTHING to do with this question.    One can legitimately argue whether giving these deductions to a taxpayer is a form of "subsidy".  But, if it is a "subsidy", it is a subsidy to the TAXPAYER which incurred the expenses.  It is not a "subsidy" to the entity which sold the taxpayer a mortagage, or the local govenrment which levied the property tax.  It's also not a "subsidy" to other providers of goods and services, who may make some additional sales because the deductions give the taxpayer more disposible income.   If you start looking at the downstream multiplier effects of every government policy which may influence a buyer's economic decision to purchase a product or service, and label them all as "subsidies" to the product or service providers, then you might as well call everything a "subsidy" and forget about the question.  </p> <p>Finally, if you are going to use tax deductibility as the criteria for "what is a subsidy", then Acela fares flunk your own test.  To my knowledge, Acela fares for business travel are fully deductible.  </p> <div style="clear:both;"></div> <p>[/quote]</p> <p>Its a subsidy to the user in  some instances.  And it is a subsidy for the service provider in that the service would not otherwise be sustainable.  </p> <p>The tax code is a political document.  It enhances or restricts certain activities.  The word subsidy does not appear in the code.  It is a matter of substance over form.  But when deductions are restricted, it is because politician have concluded that they are unfair and serve no societal purpose.  Call them what you want, the ability to deduct premium transport fares, such as those charged by the Acela services, benefits the rider, who for the most part is passing the cost through to the end users, and it benefits Amtrak.  If people don't like the term subsidy, try enabler. </p> <p>The tax benefits for home ownership in the U.S. benefit the owners.  They also benefit builders and sellers in that they can build bigger, pricier houses, which tend to be more profitable than smaller, less featured houses.  I used this illustration because it is an analogy that most people can relate to.  It is also one that causes most people to get torqued up because it hits home.  One man's subsidy is another man's vital investment.</p> <p>Being allowed to deduct the cost of an Acela fare (I never claimed otherwise) for expense account riders enables Amtrak to offer a premium service that otherwise it could not do.  True, the rider benefits, but so too does Amtrak.  In my mind it is a form of subsidy, although different in form than the direct subsidy Amtrak receives from the government. </p> <p>I am not arguing that ordinary and necessary expenses are not a legitimate business deduction.  Tthis is the guiding principle of the IRS Tax Code.  But if expenses are above and beyond ordinary and necessary, they are not deductable.  Business class is deductable because it is classified as ordinary and necessary, although like many things in the tax code, I believe that is a stretch.  </p> <p>Using all capital letters or bold letters in emails, forums, etc. is considered to be shouting.  There are several guides for on-line etiquette that deal with the issue in great length.</p>
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