Should the government pay part of minister’s salary?


What do you think of ministers getting part of our pay from the state? It’s an old idea that has been common in Europe.  The argument goes: Ministers perform services to society at moderate pay and thus government should pay them for this worthy work for civilization.  What do you think of getting some pay from the state?  Would you support this bill if it is introduced at Congress?


Of course there is no bill before Congress; the government already supports ministers in the USA to the tune of $500 million a year.  If you are a minister and do your own taxes you already know about all this of course.  It’s our private little secret.  Many lay folk don’t know that we ministers don’t pay income taxes on our use of a parsonage (or a housing allowance we use to buy our own house).  On average this benefit exempts about a third of USA minister’s pay from income taxes and is a functional subsidy from the government to us of $500 million a year.


But the secret’s out, thanks to a major spread in the New York Times this week.  In a front page business story they spilled the beans: Ministers and church businesses get lots of tax breaks.  Rick Warren’s suit to get his over-the-actual-rental-value housing allowance approved was the big story.  But they did a tell-all on all the other breaks churches and semi-religious businesses get too.


Let’s remind ourselves of the breaks:

  • We ministers are exempt from income taxes on our free use of a parsonage or on the housing allowance we use to provide our own house.
  • We ministers are allowed a special option to drop out of Social Security if we claim we have a religious objection to all such government insurance programs.
  • In some states religious businesses (publishing, child care etc.) pay no taxes even if they compete with private enterprise business that does pay these taxes.

There are other breaks but these are the main three.  And, (as you would expect) the New York Times was not particularly generous to ministers in their article, especially high paid ones.  The implication is there is a giant tax loophole ministers get that inner city poverty workers and teachers who also contribute to society don’t get.  Of course some others do get the “parsonage” benefit, namely US diplomats and the military. But both of these actually do work for the government so the implication of the article was that ministers are getting a giant $500 million tax break.


So a little history:

  • We’ve gotten this tax break on housing since 1954.
  • In 1971 the housing break was limited to the “fair market value” of the house plus utilities making it out of bounds for a [rich] minister to get their whole $150,000 salary designated as housing then pay almost the whole lump sum on a million dollar mansion each year while they live on other money. (This actually happens.)
  • When Rick warren fought this limitation in tax court he won in May of 2000.  But the IRS appealed. On appeal a new question arose—is the tax break constitutional at all, even the little one we all take (this is still an open question).
  • Congress hastening to please us ministers by quickly passing a law “The Clergy Housing Clarification Act of 2002” which affirmed the housing allowance but sided against Rick and went with the old rule—limiting our allowance to the “fair market value plus utilities” in the future. So that is where we are now—back to where we were before Rick went to war.


However, our housing tax break is not safe forever.   By exposing to the masses these breaks the New York Times may have ignited closer examination.  Few citizens really care if ministers making $40,000 get a break like this. But when some ministers on TV are getting this break while earning $500,000 a year and live in million dollar mansions they start to feel ripped off. As always the abuses of tax law creates an atmosphere calling for “tax reform” that often hurts the little guy while repairing the loopholes for the big guys.


I don’t have a strong personal position on this tax break (though I take all the breaks the IRS allows me).  However since it is in the news I wanted to bring it up for discussion this week.  Here are a few thoughts to prompt our discussion:


  • Is this tax break a remnant of “old Christendom” where most everyone (including people who don’t attend church) considered themselves “Christian” and supporting ministers through the tax code just made sense?


  • When a church operates a business competing with private enterprise should the church pay taxes on their business?


  • Should there be a “cap” on housing allowance eliminating a minister from using their allowance to purchase multi-million dollar homes tax free (then sell the house a five years later tax-free from capital gains)?


  • Should our housing benefit be extended to other people who serve society at low pay—inner city workers, aid workers, para-church workers and non-ministerial missionaries?  To all people?


  • If we lose the minister’s housing benefit how will the government tax priests who have taken a vow of poverty and have no income—how will they pay taxes on a church-owned manse with church-owned furniture?


  • To be a “minister” and get these benefits the IRS says a clergy person must 1) Administer sacraments;  2) Conduct worship and 3) Direct the spiritual life of the congregation (plus some other factors) is it OK with us for the IRS to decide what a legitimate “sacrament” is?


  • Switching from taxes to tithe, since we expect lay people to pay their tithe on money they spend for housing should ministers pay tithe on the value of their parsonage/housing allowance?


  • Should Moslem religious leaders get this benefit too?  Should it be given to the priests of Wicca, the various Devil-worshipping religions the cults?  Or should the government decide which religions are valid ones and which aren’t?


  • Is tax law in and of itself always “unfair” and thus the rich, Congressional representatives, single people, farmers and ministers alike get benefits and this business is in the category of “get whatever we can” and thus we should fight to keep whatever we can even if it looks unfair?


  • Is opting out of Social Security an honest act (3 of 10 ministers do) when we must swear that we are opposed to all government sponsored insurances and support programs?


As for me I like not having to pay taxes on a chunk of my salary every year.  I hope they keep the loophole for my personal benefit.  However I confess that when I pay my (greatly reduced) taxes I always fell like it is “un fair” even though it is legal and I do it anyway. 


So what do you think?  The discussion is open for a few weeks after this article is posted.

Click here to comment or read comments for the first few weeks after this posting


Keith Drury October 15, 2006