It's nearly tax day again. I'm pulling together my receipts into piles of little bits of paper -- medical expenses here, charitable contributions there, business expenses over there.
As a person working as a member of the clergy, the tax code often doesn't know what to do with me. For some purposes, like income tax, I can be treated as an employee of my church; the treasurer sees to it that my paycheck has withholding for my federal taxes, for example.
But so far as Social Security is concerned, I'm not an employee -- I'm self-employed, and I end up paying my own Self-Employed Contributions Act (SECA) Tax.
Lots of people are in similar circumstances, neither fish nor fowl so far as the tax code goes. That's to be expected when you try to have one basic way of taxing people, and the people you're taxing earn their living in a bewildering variety of ways.
But there's one thing that truly sets clergy apart from pretty much everyone else in the tax code. It's the idea of the clergy housing allowance. Basically, it means that I can have part of my pay set aside to cover my housing costs -- and shield that part of my pay from taxes.
There are limits to this. I can only set aside as my housing allowance the actual cost of my home -- the rent I pay on an apartment, say, or the rental value (not the mortgage payment!) of a home I might own.
But it sort of makes you wonder -- why on earth should clergy have such a special consideration from the IRS?
One answer is history. Clergy, like college leaders or some elected officials, often were given a house to live in, provided by the congregation. A "parsonage" or "rectory" was often understood as part of the profession; it wasn't just a place to live but a base of operations (and often the place where the minister of the church had an office).
These houses still exist in some places, and when they do, the tax code regards them as something done for the convenience of the employer -- whether it's a humble home next to the church, Gracie Mansion, Elmwood, or the White House. For clergy as for anyone else, if you're expected to live in a specific house as a part of the job you do, you don't get taxed on the value of that housing as income.
The clergy housing allowance is different, however. It arose when churches began selling off their parsonages, thinking that either clergy might want the freedom to live elsewhere or that the church simply didn't want to undertake the expense of maintaining a house anymore. (Of course, when the parsonage was sold it generally was also returned to the property tax rolls -- a benefit for the municipality.)
So instead of spending money maintaining the house, the congregation would supplement the minister's compensation for the purpose of housing; and, the argument went, because the minister hadn't been taxed for the imputed value of housing in the parsonage, the housing allowance shouldn't be taxed, either.
Well, maybe. It's an interesting argument, but I think in the end it fails. So, it turns out, does the aptly named Judge Barbara Crabb of the federal court of for the Western District of Wisconsin, who issued a decision last November declaring the clergy housing allowance an unconstitutional violation of the separation clause.
Full disclosure: I've benefitted from that provision of the tax code for most of my career in ordained ministry. But I think Judge Crabb is right. What's more, I think the clergy housing allowance is a bad idea for churches, for three reasons:
- There's no basis for the privilege. It's true that the vast majority of members of the clergy are not leading wealthy megachurches, and receive modest salaries. Certainly they could use the tax break. But the same could be said for the executive directors of the countless agencies in the social sector who make substantially the same sort of contribution to our communities that leaders of congregations do. There isn't a clear and cogent reason why leaders of religious organizations should be treated in ways more privileged than leaders of any other non-profit social welfare institution.
- It gives the church a false sense of costs. The largest share of religious congregations and parishes in the U.S. today is comprised of congregations supporting (or trying to support) a single ordained professional (or the equivalent, in non-ordaining traditions). The days of churches able to afford a multi-minister staff are, for the most part, coming to an end; increasingly, churches are turning to part-time models of ministry in order to afford a future. But the clergy housing allowance makes that ordained minister seemingly cheaper to hire than she would be if she were, say, working instead for a local non-profit. I'll skip the math here, but the upshot of the clergy housing allowance ending would mean in a typical case a 10 percent cut in the effective income of a minister -- something the congregation would need to find a way to make up. But it would make a more accurate (and more honest) picture of the cost of doing business for the leaders of the congregation.
- It's bad theology. Here I have to situate myself within my own Christian tradition. We who claim ourselves to be ministers of the gospel proclaim a message about a God who cared so much about reconciling all people in love that this God came to live among us, as one of us, on our own terms. It is a very dangerous thing indeed when the proclaimers of such a message willingly accept any sort of preferential treatment that sets them apart from the people they are called to serve. It's not clear to me, at least, how I can proclaim the message of radical equality among all people that lies at the heart of the message of Jesus, and at the same time insist on a particular tax privilege (or any other kind of privilege, for that matter) reserved to clergy. It's just plain contrary to a core message of the Gospel.
The Obama Administration has decided to appeal Judge Crabb's ruling, and the matter is now in a federal appellate court. I'm guessing the exemption will ultimately fall, and that I and all the rest of my brothers and sisters will have to adjust our lifestyles -- and raise the matter with our treasurers and parish councils.
That seems to me exactly as it should be. And I'll be standing on firmer ground in the pulpit when I preach about economic justice during tax season.