What would taxpayers save if FFRF ultimately wins its challenge of the parsonage exemption and the housing allowance tax benefit for ministers is abolished?
The congressional Joint Committee on Taxation reports that the exemption amounts to $700 million a year in lost revenue. The committee doesn’t break down in-kind housing, provided for in §107(1), which the decision doesn’t affect, and §107(2), which the decision declared unconstitutional.
“Church-owned parsonages have gone out of favor in the last several decades, so I would put a fair estimate of the effect of this decision at about half a billion per year,” said Forbes contributor Peter J. Reilly.
Religious News Service calculated it could reduce the take-home pay of some pastors by up to 10%. RNS erroneously reported only 44,000 clergy would be affected. Christianity Today found that 84% of senior pastors get a housing allowance of $20,000 to $38,000 in added (but not reported) compensation to their average base salary. The base salary of a full-time senior pastor in 2012-13 ranges from $33,000 to $70,000, according to Christianity Today.
ABC-TV reporter Stuart Watson has been investigating the impact of the parish exemption on megachurch pastors such as Steve Furtick, a Charlotte, N.C., pastor who’s building a $1.6 million residence.
William Thornton, a Georgia pastor and blogger, told Forbes, “No reasonable, thinking Southern Baptist minister can avoid one conclusion in all of this: The manner in which our housing allowance has been used borders on clergy malpractice. A growing subset of ministers who are very highly paid and who live in multimillion dollar mansions are able to exclude hundreds of thousands of dollars from income taxation.
“Do we really think it fair to shift taxes from wealthy clergy living in mansions to the less highly compensated? Surely not. Add to that the practice of churches ordaining ministry associates in administrative or peripheral church jobs solely so that they can be qualified for the housing allowance.”
Sampling of reaction
FFRF Co-President Annie Laurie said, “The reaction of the religious press to our court victory reveals how deeply the idea of clergy prerogative and privilege runs. They truly believe clergy should not have to pay their fair share of taxes.”
Evangelical Council for Financial Accountability: The decision is “sending shockwaves through the religious community.
“This ruling in effect would force clergy of nearly every religion across America to pay additional taxes, regardless of faith or creed. This will either force congregations to increase clergy compensation to offset these taxes or require pastors to dig deep to see if they are able to absorb these taxes.”
Southern Baptist Convention: “The clergy housing allowance isn’t a government establishment of religion, but just the reverse,” claimed Russell Moore, president of the SBC’s Ethics & Religious Liberty Commission. “The allowance is neutral to all religions. Without it, clergy in small congregations of all sorts would be penalized and harmed.”
GuideStone Financial Resources: GFS, a financial division of the Southern Baptist Convention, called the housing allowance “the most important tax benefit available to ministers.” President O.S. Hawkins said GuideStone would join a legal brief supporting the allowance when the case is appealed.
“This decision, while not unanticipated, is sadly symptomatic of our culture today,” Hawkins said. “We count it a privilege to be an advocate for those who have given their lives to ministry, and we will not forsake our mission to undergird those who so faithfully serve our churches and ministries.”
Family Research Council: “We have seen many courts over the years attempt to banish God in various ways from the public square, but this case in particular reveals a level of supreme arrogance,” said President Tony Perkins in a statement. “Once again, Judge Crabb has neglected to consult the Constitution that she has sworn to uphold.”
The Rabbinical Assembly: “[Disallowing the exemption would put many rabbis] at risk of losing their homes,” said Rabbi Julie Schonfeld, executive vice president of the international group of Conservative rabbis. “Owing to dramatic increases in housing costs across America, many of our synagogues are located in areas where the cost of a home in walking distance of the synagogue is out of reach of any rabbis’ salary or the synagogues’ resources to pay them. Homes were purchased taking into account the exemption to make the budget work.”
Religious Action Center of Reform Judaism: “[The Reform movement is] confident in the end that we will be able to protect the financial well-being of our clergy and our synagogues,” said Rabbi David Saperstein, director.
Jewish Federations of North America: “The parsonage allowance has a long-standing history in the United States, as a demonstration of the great importance our nation places on the role of clergy in American civil life,” said William Daroff, the group’s chief Washington lobbyist.
“Congress quickly and virtually unanimously came to the defense of the parsonage allowance when it was subject to attack over a decade ago, and we are certain that it would, with our support, again protect this provision that has been part of the fabric of our tax law and civil society for almost 100 years,”