Do special tax laws favoring churches and clergy promote the Christian mission?

Today’s post is a comment on an article in the Alban Institute newsletter entitled Special Privileges and Church Vitality by Dan Hotchkiss. There is quite a discussion going on within its Roundtable, mostly among clergy. This is a topic lay people have a vital interest in as well.

The article raises questions about special tax benefits provided to clergy. Many lay people know nothing about these perks unless they’ve served on a church council or governing board.

Here’s how they usually find out about it.

It’s budget time. The pastor makes a request at a board meeting to have more of his salary called “housing allowance.” There is probably some discussion about how much that should be. One person asks timidly,  “Why are we doing this? What difference does it make?” The question is probably brushed aside — an answer given but not clearly explained. The rest of the discussion probably takes place after the meeting when the pastor is no longer present. That’s when council newbies start to ask questions and council veterans struggle to find answers that make sense.

The conversation goes something like this:

“What was all that about the housing allowance? That looks like an awful lot of money for housing! Why was pastor so insistent that salary be called ‘housing.’?”

“Well, pastors get a tax break for the portion of their salary called ‘housing.'”

“They do! How come? How much?”

The conversation will go on while the mental gears shift into full throttle.

“You mean, the pastor will save thousands in taxes because salary is called ‘housing’?”

“Yes, it’s because pastors are considered self-employed.”

“You’re kidding! The pastor has a steady job and we are paying all these benefits, including health  benefits, an allowance for a car and books and even an occasional sabbatical. And what about all the rules we have to follow if we decide we want a new pastor? How do you figure that’s self-employed.”

“Well, it isn’t really. It’s just what the tax laws allow us to call it so that pastors can get a break on their taxes.”

The mental calculator is now dusted off. The new council member starts to figure how much he/she pays in taxes compared to how much the pastor is paying on a larger benefits package. Then the new member remembers the sermon on tithing and starts to wonder how much the pastor is putting in the offering plate while expecting 10% from parishioners who don’t get tax breaks on their salaries.

The conversation ends for now, but resumes at the parishioner’s dinner table and at the water cooler at work . . . and on and on. The focus is now on comparing how the church values preachers and parishioners and not on ministry.

Mr. Hotchkiss raises good questions and asks us to look at the effects on church vitality. Whether or not you are in favor of this tax tradition may lie on whether or not there are benefits to you.

When you look at the total equation, the harm to Christian community might be greater than the benefits to individuals. The issues raises many more questions which will be addressed in later posts.

Perhaps there are benefits to Christian community! What are they?

What do you think?