Taxing Minister's Housing

A US District Judge has ruled that the practice of exempting ministerial housing allowances from taxable income is an "establishment of religion" and thus, unconstitutional.

There will be appeals of this ruling, which will prove that the clergy are no more willing to see a tax increase on themselves as any other profession. Anti-clericals were be delighted with this unsurprising news. The tax code is riddled through and through with special favors, dispensations, exemptions, credits and deductions for all sorts of groups. But ministers are supposed to be above all that.

A tax advantage for one profession is indefensible, except that "everybody does it."

So let's leave moralizing aside and look at this for what it will do.

The "voluntary association" religious organization is dying out. By "voluntary association" religious organization, I mean a religious organization that is created and sustained primarily by the voluntary contributions of less than a thousand ordinary people. Out of their gathered contributions, the organization has a building and a professional leader, some staff and some programs. Churches and other religious congregations are the prevalent form of voluntary organization in the country, a long-standing fixture.

They are becoming unsustainable in their present form, in almost every aspect. They ran on volunteer labor, but the role of women as necessary workers in most families has dried up that source. Paying staff to do what volunteers used to do is expensive, and underpaying them is unjust. Rising real estate costs have made the building more difficult to sustain, and new buildings often prohibitive in growing areas. The rising cost of higher education has saddled the ministers with large debts, which must be repaid with current salaries.  

But the overall cause for the decline of religious institutions: stagnant incomes for all but the wealthiest is making churches and congregations unsustainable. Imposing an additional tax burden on ministers will only make it worse. Either ministers lose income which cannot be made up by the congregation, or congregations are further squeezed.

It's a class issue. For decades, there has been a conflict over the wealth created by this economy. The wealthy have managed to accumulate most of it, and as a result, popular grass root institutions that depend on grass roots financing are withering away.

Yes, there are some churches and congregations doing well. If they have wealthy members, or well-paid professional members they will do well. If they have endowments from previous generations, they can survive. If they can accumulate enough spare capital from wealthy members to market themselves effectively, they can become large enough to succeed, but how many small churches die to make a mega-church thrive? (Remember the total proportion of church goers is dropping, so rapidly growing churches are growing at others' expense.)

One can argue that capitalism's "creative destruction" has come to the religio-industrial complex.  This is no different, one could argue, than the destruction of the mom-and-pop stores by the supermarkets. Within the capitalist ideology, whatever happens is probably for the best. (And they say religious people are utopian!)

But within a worldview that says what is for the best will be made by self-directed human beings working in voluntary associations, economic conditions that threaten grass-roots institutions are not "creative destruction" but just "destructive destruction."(read your James Luther Adams, clergy!)

This ruling will bring new attention to the finances of the grass-roots church of all denominations.  But let's see it for what it is: part of the destruction of autonomous and self-directed voluntary organizations for the poor, the working class and the middle classes. It's coming close to the clergy, now. We, in the clergy, might want to blame the IRS for this downturn in our personal economies, but the larger picture is growing class divide, and the impoverishment of the majority.


  1. Thank you, as ever, for your depth of context, which grows my horizons.

  2. Anonymous9:02 AM

    I loove your insight. One of the points I have shared with people when this matter comes up is that as a minister when I sought to have a term of my contract honored by a former congregation found that there was no legal recourse and that if nothing else justified the exemption. But in light of your article I can see in a bigger way how that ties into some of the broader class issues you identify.

  3. Anonymous11:47 AM

    I don't know what to think about the housing tax deductions for clergy. Frankly, I don't see how they should have a tax status different from any employees of non-profits who are also reliant on fundraising and have advanced degrees that saddle them with crippling debt. I don't think you make a very strong case in that regard. You can't describe all clergy as representing a single special interest either. I also question your assumption about growing megachurches vs. declining membership. This certainly has nothing to do with the majority of faiths or even a majority of Christian sects. "Remember the total proportion of church goers is dropping, so rapidly growing churches are growing at others' expense."
    The megachurch would appear to appeal to people from an evangelical background to begin with. And where are the megachurches that are stealing Jews, Muslims, Hindis, Buddhists, and Unitarian Universalists?
    How do we know there is a correlation? Couldn't the megachurches be attracting new people? Are they recruiting members from other churches or is it possible these are people who would not be going to church otherwise and discovered the megachurch?

  4. Anonymous8:57 PM

    The history of this deduction goes back to a time when most ministers lived in personages. If they drop this, they will also have to start including the value of the housing that is provided free by congregations that still own personages. And how will they handle this issue for those who, for example, live in convents? (I don't know how that's handled now, I'm just wondering. This is also complicated by the fact that many ministers are paid as consultants--the church does not pay FICA. Like any other consultants, they can take a portion of their housing expenses as a deduction from their income if they work from home.

    In general, I would not object to a change in this, but it won't be simple, and churches will have to work hard to figure out how to adjust it. Heck, I wouldn't even object to losing the exemption from pretty taxes, which would also have a rather dramatic effect on ur congregational budget! And if this ruling is NOT overturned, I'd predict that a court challenge to eliminate that exemption will not be far behind.

    With the rather bizarrely complex nature of our current tax code, these things are never simple.

  5. Tom - Well said .. I picked it up off a repost by Kathy Ellis at Restoration (Phila where I was once upon a time); thank you. I added this comment: " That's a thoughtful piece and the economic pressure & changing role of women are equally relevant for our congregations .. oughtn't be hidden. I was keenly aware of both by the 80's. A related force is the availability of high quality thinking & music & story via I-Net & TV. Worship needs to be very good .. and maybe accessible via time shift."

  6. Clyde Grubbs12:31 PM

    Housing allowance for everyone! Make the first $12000 of income tax deductable for each person in a household.

    The income tax is regressive and the only "fair thing to do" is reduce the burden on the wage and salary workers and increase it on the top.

  7. Yes, it has to do with class - but also with the fact that religion is gradually losing its special treatment by the U.S., something it should never have had. To have true separation of church and state, churches and ministers must be treated precisely the same as other organizations and individuals. Churches should be just like any other non-profit organization, and should not automatically receive non-profit status simply by stating that they are churches. They should be financially accountable, as other non-profits are. I'm quite aware of the previous Supreme Court ruling on this issue, but it is past time that it is revisited.


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