No (Free) Lunch for You!

Earlier this month, the IRS revealed that it has an interest in taxing the free lunch (and other workplace compensations) offered by tech giants like Google, Facebook, Twitter, and Zygna. Of course, both the employees and the corporate accountants are rightfully outraged that the IRS would sneak its grubby paws on their corporate conveniences. But, the IRS has long allowed for companies of any size to write off luncheons as business expenses so long as business is discussed during the meal. Tech companies specifically decided to offer the free meals to encourage workplace collaboration, coincidentally taking advantage of the write-off.

"It would be stupid to tax this food," said Sanjeev Agrawal, who ran product marketing for Google from 2003 to 2005 and whose Googler-wife still enjoys the perks today. "Free meals should not be taxed because they're not compensation. They're a phenomenal convenience, a terrific motivator and a great social thing because it gives employees an easy way to meet and pass ideas back and forth." No free meals? IRS considers taxing perks at Google, other tech firms

According to Professor McMahon, that justification is not enough.

"A company cannot provide tax-free meals if workers commute from home and have the ability to bring their lunches with them." Google, Facebook Workers Could Owe Taxes On Their Free Lunches

"I buy my lunch with after-tax dollars," said Mr. McMahon, the University of Florida professor. "And I have to pay taxes to support free meals for those Google employees." Silicon Valley's Mouthwatering Tax Break, WSJ: Taxing Lunch at Google and Facebook?

So, is the solution to this tax dilemma for a company to forbid employees from eating their own food, and force them to eat in the corporate cafeteria? And somehow, even though McMahon isn't involved with Google, he's paying for their lunches? Does he really want to interpret the lack of a tax as a government subsidy? The socialism is strong with this one!

What most bothers me about the reporting on this issue is the assumption that we need the permission of the IRS so that we can allocate our own resources. Google has made an arrangement with its employees, for mutual advantage. But Big Brother, whose outrageous expenditures have forced the conjuring of more wealth extraction schemes, doesn't benefit enough from this deal and has to act, quite literally, as the school yard bully that steals lunch money.

Under what justification can the IRS/government possibly ask for a share of this private deal?

They built the roads and subsidized the farms? Well, no. Roads preexist government, and even wild animals make trails. We'd most certainly have roads without government. David Friedman has outlined how they might be privately funded (a worthy subject for a future post). We'd even grow food and organize amounts of expected output without government intervention, as Switzerland neighbors do with their home gardens. The government has illegitimately exercised control over these areas and now it has the gall to use that position to justify further expansion. Outrageous!

They provide the money used in the exchange? Well, no. Because in this case, dollars aren't being exchanged. Employees just show up and eat.

Because it infringes on some petty rule in the tax code? Well, yes-ish. But if we permit this excuse we then submit to the underlying assumption that we need their permission to eat lunch. Who bloody cares about the particulars and details of the rules, when the entire premise for having the book is unsound? I certainly care more about my lunch than I do about the IRS.

But what about the whole can of worms surrounding the per-employee benefits? Because, surely, the IRS wouldn't wish to levy a flat average tax on all employees. That policy would negatively affect those that bring their own lunch. To properly account for the tax Google would have to track what each employee chooses to eat and maintain a running tab. But, because the IRS consumes such statistics, I think Google should tax it in return for the trouble. I mean, why should they have a free (information) lunch at Google's expense?

Beware Big Brother, he'll eat your lunch.