Monday, November 12, 2012

How about means testing the clergy housing allowance?

As a result of the election last week, it seems we will be in a mode for what are euphemistically labeled 'revenue enhancements.' For Podunk First and Last Baptist Church folks that would be tax increases.

Would it be better for country to raise the tax rates or flail away at the tax codes to eliminate some of the staggering numbers of loopholes and special treatments?

And can we not conjure here some haughty and righteous indignation over the scandal of tax loopholes for those disgusting that special interest groups? 

Wait a sec. I almost forgot. We clergy have a very special loophole of our very own, the Minister's Housing Allowance, which frees up a pretty good chunk of the paycheck of every ordained SBC minister, teacher, and administrator from any income tax exposure at all. Not only that, we get to double up by taking the housing allowance and also deducting mortgage interest.

As I have said, 'What a great country!'

Call it our very own special interest red, white, and blue tax dodge.

Got great church which compensates you sufficiently to have a million dollar home? Write that sucker off, brother! Let some poor unordained sap pulling down $800 weekly pick the slack caused by your removing, oh, maybe $100,000 from liability for income taxes.

A very talented SBC minister near me was featured recently in a news article. He has a great church and does wonderful ministry. I'm sure with the size church he has that he is paid quite well. That is their business. Doesn't cost me a dime. God bless 'em.

Oh, look there he is standing in front of what is described as his $1.2 million home. Hmmm, there seems to be some pungency in the air and  I'm getting a whiff of a mammoth housing allowance.

Don't blame me. I did not write the article and he didn't have to pose in front of his mansion but since he did, I can speculate that his housing allowance deduction alone is more than the combined total income of several lesser paid SBC pastors.

So, I ask:

1. Is there some church/state, First Amendment problem with means testing the Housing Allowance?
2. Is there some practical reason that clergy should oppose means testing? The military housing allowance has a cap and, as I recall, is variable based on rank. What would be wrong, objectionable, about this being applied to clergy in the same manner?

Would it cause any harm to religion in America if the housing allowance was not allowed for clergy whose income was, say, twice the SBC average, or about $115,00. That too low? How about means testing it to step it down beginning at $150,000 and be eliminated at, say, $250,000 in income?

What's the problem with that? OK, index it for inflation if our monetary policy is destroying the value of our currency.

It is tough for me to empathize with a pastor whose salary is $250,000 and who whines about losing his tax break. I'm just not feeling that pain and the gift of mercy isn't kicking in on that issue.

One wonders, what would our SBC lobbyists in DC do if a proposal to means test the housing allowance was on the table this year? Would they go to bat for the handful of folks in our convention whose income is north of $250k? Would there be a spirited defense of our loophole for the top earning one percent of clergy?

I don't know but if so, that would be a good way to create some additional Democratic voters, and I'm thinking we already have enough of those.

Consider me wide open for someone to explain what the problem would be with means testing our housing allowance. You can even do it anonymously without being photographed standing in front of your $1 million plus house.


Tom Parker said...

It is way past time to take this tax perk away from these pastors.

Peter Reilly CPA said...

I think means testing would create too much complexity. I would make for one more complicated computation. The simplest thing would be to just put a dollar cap on the amount of the allowance. Maybe tie it to the military housing allowance for whatever the rank of the average chaplain is. Even if you made it the highest possible military housing allowance it would weed out much of the most egrigous abuses - except the basketball ministers.

William Thornton said...

Saying that a tax benefit would be means tested has some cachet in the context of fairness and application of tax policy to those who have greater need for it but I take your point on the complexity of means testing and I am all for simplicity.

I sort of thought CPAs loved the idea of complexity for crass commercial reasons. ;)

Anonymous said...

Why did you wait until retirement to go into this campaign? Did you give up your housing allowance? I fear you will end up hurting all pastors, not just those who abuse the privilege. A large percentage of pastors also pay the full 15% on the social security side.

William Thornton said...


1. I have been writing on the HA for at least five years.
2. Any retired SBC minister who receives payout from Guidestone takes their housing allowance there.

You are batting zero so far.

3. The HA is taxable on the SECA side.
4. Means testing (or a cap) will not affect me or 95% of SBC clergy because if it is ever implemented our incomes will fall far below it.

Do you not see that million dollar homes as a nice tax benefit for elite clergy harm us far more than my calling attention to such?

RLBaty said...

Glad to see you still interested in the issue, William, and those comments from Peter.

For myself, I've been trying to get the feds to deal with the offensiveness of the housing allowance for 30 years or so.

At least there's now a federal case pending and set for trial in January 2014.

A means test may resolve some of the administrative issues, but won't cure the constitutional issue if the law remains ONLY for ministers. Alas, as Peter notes, it may be too complicated to ever be instituted.

Also, I notice your current column doesn't address the additional administrative problem whereby the IRS allows the benefit to "basketball ministers" who coach at places like Pepperdine.

In my world, the best thing to do would be to quickly repeal IRC 107.

Work from there to start over and see what you can the President and Congress to sign off on.

William Thornton said...

While I have a rudimentary understanding of what you mean with the "basketball ministers," I suspect that most of my readers do not.

I would love to have a short, 500 words or so, treatment of the Pepperdine thing that would be the backdrop for a general discussion of this. Accomplishing this by providing links doesn't work well.

Perhaps you could consider this? Email me.

RLBaty said...

For the benefit of the readers who may be wondering; I sent William a short exposition on "basketball ministers" and await his further presentation of the issue for the benefit and consideration of his readers.

Otherwise, I have just received a notice from Sam Harris' publicist that Sam Harris will not answer my 6 simple, yes or no questions dealing with my argument regarding a fundamental of atheism. A few days ago, Vic Stenger also ran from the opportunity.