It’s the end of the housing allowance as we know it, and I feel fine

On October 9th a federal court ruled that clergy housing allowance, the portion of income that is nontaxable in pastors salary, is unconstitutional. Most people probably did not notice this ruling, but I can tell you that clergy did. It sent shock waves of panic through clergy social media. It’s the end of the world as we know it.

OK…perhaps I exaggerate on all counts. We have been here before. In 2014 this same type of ruling was struck down by the appeals court.  If you are panicking about this ruling you can probably take some comfort in the fact that the Appeals courts have not changed all that much. For the time being the world isn’t ending and the housing allowance will still be there. It will take time for this all to move through the courts and things will not change all that quickly.

Confident as I am that this particular case will not be the case that strikes down the housing allowance, the absolute truth is that one day the clergy housing allowance will be gone. God has promised us many things as ministers of the gospel, but not the housing allowance.

From the person down the street to Rick Warren: a short history of the housing allowance. 

A bit of history first. For a very long time church property has been tax free in one way or another through multiple societies. Salaries for priests, on the other hand, have always been a little bit of a debate. This article by the Acton Institute gives a fairly good (albeit conservative) history on the housing allowance and the real crucial take is this paragraph:

By the early twentieth century, though, both clergy housing and taxation had changed considerably. So in 1921, Congress passed the Revenue Act, which exempted from the gross income of ministers the rental value of any “dwelling house and appurtenances thereof” provided by a church as a part of clergy compensation. This parsonage exemption, however, applied only to ministers who lived on property owned by their church and disadvantaged ministers whose churches provided a housing allowance rather than a church-owned parsonage. In 1954, Congress amended the tax code to allow ministers to exempt a portion of their income to the extent used by the minister for housing. According to the Senate Report, the purpose of this addition was to eliminate the disparity in the tax code between ministers who lived in a church-owned parsonage and those who were given a stipend with which to secure housing.

Basically, in the 20’s the income received from living in a parsonage was exempted from taxation. However, there are lots of pastors who don’t live in parsonages. As the living patterns of clergy changed, along with the rest of the country, in the 1950’s congress changed the law so that both ministers who live in parsonages and those who receive a stipend for housing expenses get the same tax breaks.

This may seem like a simple tax code issue, but unfortunately it is wrapped up in larger issues of American history. Religion was by no means a private and neutral thing. During the Cold War supporting faith as much as possible without establishing an institutional religion was seen as necessary in order to fight communism. President Truman was clear about this point when he said “If I can mobilize the people who believe in a moral world against the Bolshevik materialists, who believe as Henry Wallace does ‘that the end justifies the means’ — we can win this fight.” It was in the same year that the tax code was changed that the phrase “under God” was added to the pledge of allegiance by President Eisenhower. Just like Truman, Eisenhower was clear that faith was necessary in the struggle against communism when he said:

“To anyone who truly loves America, nothing could be more inspiring than to contemplate this re-dedication of our youth, on each school morning, to our country’s true meaning. Especially is this meaningful as we regard today’s world. Over the globe, mankind has been cruelly torn by violence and brutality and, by the millions, deadened in mind and soul by a materialistic philosophy of life…in this way we shall constantly strengthen those spiritual weapons which forever will be our country’s most powerful resource, in peace or in war.”

So the issue gets confused. Were they giving tax breaks to clergy in order to be fair or were they giving tax breaks to clergy because they were the ministers of the spiritual weapons needed to fight communism? It gets messy fast and the lines between religion and state are not all that clear.

So you are saying to yourself “clergy don’t pay taxes because they got wrapped up in our patriotic fight against communism. That doesn’t seem constitutional.” Well it probably wouldn’t be if clergy paid no taxes, but we do pay taxes. Actually, on average we pay more taxes than people in our same income bracket. This is because, for purposes of social security and medicare clergy are considered self-employed and subject to those taxes. (see this IRS website for more info). For medicare and social security the tax rate for those who are “self-employed” is 15.3%. Workers who are classified as employees only pay half that with the employer paying the other half. This creates two rather strange situations. First, it is actually better for churches, especially small churches that couldn’t afford covering half the social security and medicare taxes, that clergy remain classified as “self-employed.” Second, in order to keep clergy tax bills in line with the rest of their income bracket the housing allowance is actually necessary.

The exception to all this is the clergy who abuse the system and try and classify as much of their salary as possible as “housing allowance.” Rick Warren was hit with audit for this very problem. He claimed that his housing allowance was more than $70,000. Effectively, Warren claimed that his entire salary from his church was housing allowance. This could mean Rick Warren’s mansion is the “house with many rooms” that Jesus is talking about in John 14 or Rick was abusing the system.  The IRS at the time thought it was the later option and so said that Warren was being unreasonable and gave him a $50,000 tax bill.

The real kick in the pants is that Warren challenged the ruling in court but before the court case could be decided congress passed a law called The Clergy Housing Allowance Clarification Act of 2002. This law basically said that the housing allowance must follow fair rental value of a pastors house. However, the big exception was a clause that said that the tax break was unlimited for any tax return before the law was passed, basically giving Warren a get out of your tax bill free card. This made the IRS look stupid and left everyone wondering why a famous pastor was getting a one time unlimited deduction. Fun fact: this law passed unanimously in congress.

Overall, it’s just a weird situation. Most pastors, the one ones you run into on a daily basis do not abuse the housing allowance system and, in fact, need it in order to not be crippled by tax bills. These people aren’t the Rick Warren’s of the world, but the normal families who have student debts and car loans. However, there are some very public pastors who abuse this system or, as in Warren’s case, have the system changed for them.

The end of the world as we know it

Well we are already over a thousand words and we haven’t even gotten into the issue: why am I certain the housing allowance is going way?

It basically boils down this: it’s no longer 1954. The world is no longer divided into materialistic communists and good faithful Americans. Faith no longer determines the battle lines between good and evil in our world. There once was a world (called “Christendom” by some theologians like Douglas John Hall) that used the full powers of the state to support religion and specifically Christianity. While no official religion was established in this country there was a defacto religion: Mainline Protestantism. Businesses were closed, movie theaters were closed, everything was done in order to support religion because religion was a necessary part of the fight against an evil ideology seeking to control the world.

Well, the fight against that ideology was won and that has left the underlying assumption, namely that supporting a Christian or at least religious America makes us stronger, without any power. Not only is that underlying assumption without any power, but there seem to be several facts that run counter to the idea that a religious nation will be better. Richard Spencer, of white supremacy infamy, says he is an atheist but describes himself as a “cultural Christian.” Franklin Graham spent ten million dollars on a fifty state tour for this past election season. This is not to say that one can draw a straight line from Richard Spencer and white supremacy to Franklin Graham and his politics to then the housing allowance. One can, however, make this clear connection: when the white supremacists claim your name as a cultural marker, when famous preachers take advantage of tax laws so that they pay nothing, and when famous preachers spend ten million dollars on getting officials elected the result is that church has lost all benefit of the doubt.

And here is the thing, while I may make a clear distinction between Rick Warren and myself I’m not so sure the world does. I’m a Lutheran pastor of a small church and he is megachurch evangelical pastor, but we both claim to be Christian. Both claim to be a part of the body of Christ. Paul says “the eye cannot say to the hand, “I have no need of you.” It cuts both ways too. Just as I can’t separate myself completely from Rick I also can’t separate his works (even his tax dodging works) from myself. The Bible always believes quite strongly in collective responsibility. It is painful that a minority of pastors have fudged the housing allowance for their own benefit. But because they have that means I too loose all benefit of the doubt.

And when we loose all benefit of the doubt that means our cultural privileges get taken away. As much as most clergy need the housing allowance in order to make their finances work, it is still a privilege. Just like nothing says soccer can’t be on a Sunday nothing says we automatically get our privilege.

And I feel fine

So pastors, here we are. Worried that the tax break necessary to make our finances work is going to be taken away. Up to this point I haven’t been too reassuring. I’m pretty confident that if it doesn’t get taken away with this court case it will be taken away by another. And really, this gets at a much larger issue for the clergy: how scared are we?

We may not think of ourselves as scared, but quite frankly I hear an awful lot of fear in our voices as we talk about the future. We have been warned time and time again that the coming changes in the church mean that pastors are going to have to be “bi-vocational.” A lot of pastors I know talk about this coming time with absolute dread saying that they have no other skills they can be paid for. I happen to think predictions of this bi-vocational future are over stated (and also that pastors do have a lot of marketable skills, however that is a blog post for another time), but all the same I can hear the fear in our voices.

Similarly I can hear the fear in our voices when we talk about the coming day when the housing allowance is gone. It will be painful. It will threaten finances. It may even threaten some people’s ability to be full time ministers of the gospel.

Yet, here is the real question we need to ask ourselves: Do we trust that God will provide? 

Make no mistake, that is the question we are wrestling with. When we talk about a bi-vocational future we are wrestling with whether or not we trust God to provide. When we talk about our finances we are wrestling with the question of whether or not we trust God to provide. When we worry over the future of a shrinking church we are wrestling with the question of whether or not we trust God to provide. This is not a question I am arrogant enough to answer for you. Partially that is because I have my own struggles with trusting that God will rain mana from heaven. In my own experience God always has before, but that doesn’t mean I am any less anxious about the future.

Whatever your answer is to the question of God providing for us, I want us to make sure that is the question we are dealing with. Not the question of whether finances will work, not the question of job security and future employment. We make an idol when we wrestle with those questions first and don’t begin with God. And if that long history in part 1 of this post proved anything to me it is this: we have been making idols for far too long. Idols of privileges and benefits, idols of our position in society, idols of the way ministry has always been done.

We’ve been wrestling with idols for a while now. Perhaps it’s time we wrestle with the living God. For as long as we are wrestling with the living God who has called me through the gospel and promises to be emmanuel, God with us, even in death I have this basic belief: I’ll be fine.

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