William Thornton, the SBC Plodder is kind enough to share his posts with us from time to time. This is a companion piece – a point/counterpoint – to the next piece that will be post a few minutes later, from Rick Patrick. Comments on this entry will be closed. Read both articles and then comment on the next post from Rick Patrick. Here is a link to Rick’s article which will post a few minutes after this one.
I have seven articles on the clergy housing allowance, our Sacred Tax Loophole. Seven is a good number, the number of completion, unfortunately there will be more to follow, since there is an active case challenging its constitutionality.
Such is the tension between church and state in America that a 21st Century Jesus might say “the lawsuits over the first amendment you have with you always.”
The challenge to the housing allowance is in my view a constitutional long shot and the clergy who live in pastoriums need not worry at all here, since there is parity between their income tax treatment and that of secularly employed workers who live in employer provided housing.
But I would ask my clergy colleagues who own or rent their own home and who receive a housing allowance check each month exactly how they explain this business to their congregation, deacons, church finance committee, and/or church treasurer?
I envision a conversation like this:
Treasurer: “Pastor, why do I need to write you a separate housing allowance check each month and have this paperwork on file about it?”
Pastor: “Because tax law gives me an exemption from income I use for my housing.”
Treasurer: “Is this something that I can do, get a separate check for the amount I spend on my housing and have that free from income taxes?
Pastor: “Well, no. You cannot because you are not ordained and because you have a secular job. The tax break is only for ministers.”
Treasurer: “So why does the government give you a tax break that they do not give me?”
Pastor: “I guess because there are a lot of low paid clergy and it was thought to be beneficial to the citizenry as a whole that we get some break on income taxes.”
Treasurer: “Well, I don’t mean to be argumentative but you are not one of those low paid ministers. You are paid about the average around here, $60,000 or so if you include these housing allowance checks. And your wife works and has an income. Come to think of it every other pastor I know around here lives in a two income family and with any kind of second income those families have an income and benefits over six figures. That is hardly poor. This doesn’t seem to make much sense to me.”
Pastor: “I see your point but would you just write the check, hand it over, and then call our congressman if you don’t like the law. I didn’t write it.”
Treasurer: Scribble, scribble, scribble…”Here you are.”
When asked about the challenge to the constitutionality of the housing allowance, our Convention Attorney advanced an economic argument, that the tax break was important to many SBC clergy who are not highly paid.
This is both an accurate statement and is probably the best argument for keeping the tax policy. There are 45,000 or so SBC churches in the SBC and many tens of thousands of pastors, church staff members, and retired pastors. No doubt there are many for whom a thousand dollars or so in tax savings is not just welcome but critical.
But clergy aren’t the penurious demographic we once were. Churches by the thousands have sold their pastoriums and their minister no longer has to live in church owned property. Pay has increased and we are about three generations into two income families being the norm.
Life in the Christian ministry isn’t perfect but it has improved financially.
Facts on clergy pay for Southern Baptists can be a slippery. I’d speculate that few in your church know how much you are paid, in total, even though they see the financial reports every quarter. One of the ways they are unintentionally misled is by the division of cash payments into a salary and a housing allowance. Members look at the salary check and think, “I don’t see how our minister can get by on that,” but overlook the housing allowance check which often is the larger sum.
The LifeWay Compensation Study gives state-by-state figures and the average for all of the states where the vast majority of SBC churches are located is around $57,000. That is a 2010 figure and includes salary plus housing allowance but not retirement benefits and insurance.
Get the sum in your head: $57,000, average senior pastor pay.
Now, take an average school teacher’s salary. Here in Georgia it is about $53,000, slightly less than the average senior pastor. The teacher almost certainly has a mortgage and utility expenses but the law does not allow he or she to exclude what might amount to about one-third or so of their salary from gross income as does the senior pastor.
He gets a fat tax break and cuts his gross income for income tax purposes by $20,000 or so. She gets…well…nothing.
Why give a tax break for the minister and not the teacher? Some clergy wag might say because the teacher gets all summer off, to which some lay wag would reply, “But ministers only work one day a week.”
We all have our jokes and arguments but the bottom line is that there is not really any persuasive explanation for the clergy housing allowance. It’s just a longstanding government tax policy.
Most of us hate the idea of the government arbitrarily picking winners and losers, like with the housing allowance but I suppose we can certainly get used to the concept so long as we are among the winners.
Add to the discussion the reality that some very affluent ministers who earn into seven figures and live in multimillion dollar homes are able to exclude as much as they can justify. It is not unreasonable to presume that there are many ministers who exclude several hundred thousand dollars of income, annually, through the housing allowance. Make some sense out of that.
So, how do you explain this to someone in your church who takes an interest?
I would be curious to know.
- General information and a strong argument against the constitutionality of the housing allowance: Here and here.
- Argument that although it is not unconstitutional, it is bad tax policy: Here.
- Abuses of the housing allowance: Here, here, and here.
- All glazed over about the whole thing and don’t want to think about it: Here.
Many of the links are to a Forbes blogger and CPA, Peter Reilly, who is among the few who seem to have an interest in the matter. His most succinct and interesting treatment of the matter is, Work, Fight or Pray – Vestige of the Medieval in our Tax Code.