I had a really cool part-time job back when I first started in seminary. I was a file clerk in a Baptist mission society library.
If that doesn’t sound amazingly cool to you, that’s only because you never got to see the stuff that was in those files, which contained nearly 200 years worth of treasures, starting with the handwritten letters and diaries of Adoniram Judson from 1810.
Sure, there was a lot of mundane detail filed away in all those cabinets containing two centuries’ worth of missionary correspondence, but there were also some really remarkable things: The minutes from the mission society meetings of 1844 and 1845, detailing the Baptist’s great schism over slavery; Calista Vinton’s letters from the early 1800s explaining that God had called her to preach and that therefore no man had the authority to tell her otherwise thankyouverymuch; testimonies from witnesses to the atrocities under King Leopold in the Congo; abolitionist newspapers from the 1850s; a first edition of the first English-Burmese dictionary; documents relating to the founding of Liberia; a report on local missionaries’ investigation of a resurrection attributed to Simon Kimbangu. And then there were the drawers filled with photographs, daguerrotypes, and the uncategorized figurines representing domestic gods and goddesses.
And filed along with all the rest of that in row upon row of battleship-gray cabinets were two centuries worth of financial records. That’s why those archives and the library itself were located within the financial department of the mission society. And that’s why the various financial and budget committees held their meetings there in the library, at a conference table nearby the desk where I sat carefully removing staples from decades-old onionskin pages.
Overhearing such meetings was my first introduction to the Rube Goldberg machine of clergy compensation. Consider what it means to be concerned with fair and equitable pay for a roster of missionaries serving in Japan, Zaire, Thailand and Haiti. But then consider that clergy pay is further complicated by the odd assortment of tax rules that have agglomerated over the years.
Like, for example, the housing-allowance exemption for clergy.
Church property is not taxed. That includes parsonages — the homes, usually adjacent to church buildings, where some clergy live. But since many houses of worship don’t have parsonages, that created a discrepancy in the way that various clergy were taxed and compensated. That seemed particularly unfair since it meant, in effect, that smaller congregations or those part of less wealthy, less propertied traditions were being taxed for something larger, wealthier churches were able to provide tax-free. So the IRS created a general housing-expense tax exemption for clergy whose churches did not own or provide a parsonage (the formal rule, I think, dates back to the 1950s, but the practice of exempting housing expenses for clergy predates that).
That rule, in turn, changed the way most clergy get paid. The effect on clergy compensation was similar to the effect many of us experience from employer-provided health insurance. Your employer can offer you compensation in the form of wages — on which you pay income taxes and payroll taxes, and on which they pay payroll taxes. But your employer can also offer part of your compensation in the form of health insurance — which doesn’t create a tax burden for either you or the employer. Those tax credits and tax breaks (about $250 billion a year) created a powerful incentive for employers to provide such health benefits (no, they didn’t do this out of altruism), but they also created an incentive for employers to shift more compensation toward health benefits and away from wages.The exemption for a “housing allowance” for clergy, similarly, created an incentive for churches and other entities to shift more of the compensation for clergy into those allowances, reducing salary or wages accordingly. As Tobin Grant explains:
Over time, fewer churches owned parsonages and instead gave clergy housing allowances, which were also treated as tax-free. The difference, however, was that these were regular salaries that now had an exclusion. Part could be tax-free, part couldn’t. So, why not give a pastor a huge housing allowance, which is tax free?
This was a headache for the budgeteers at the mission society. They had missionaries in downtown Tokyo and missionaries in Cap-Haïtien and in rural Zaire — places where the cost of housing was radically different. They wanted the housing allowances they provided these missionaries to be adequate for the missionaries in Tokyo (unlikely) and not to be extravagant in a missiologically harmful manner in Haiti (very tricky). That was difficult enough even before the complicating factor of the housing allowance exemption, which tended to create a tax advantage for missionaries in Japan that far exceeded that enjoyed by missionaries in the developing world.
The housing-allowance exemption for clergy, in other words, is a mess. It’s a kludge — an inelegant work-around for one problem that has, in turn, created other problems for which other clumsy, inelegant work-arounds have had to be devised. It works, sort of, but it doesn’t work well. It’s the way things are done, at this point, but it’s not the way things would have been done or the way things would be done if we had the luxury of starting over from scratch with a clean slate to design a more logical and efficient system.
This particular kludge is in the news thanks to a ruling Friday by a federal judge who reached the unremarkable, unavoidable conclusion that a tax exemption on housing for clergy “provides a benefit to religious persons and no one else.”
Noting that such establishing of a privilege for religion is not constitutional, the District Court judge struck down the rule.
I don’t see any way around the fact that “a benefit to religious persons and no one else” is unlawful. Yet despite the clarity of the law here, the politics of this get far more muddled, and we’re likely to see this case take a very long journey all the way through the court system, with all sorts of strange bedfellows and unlikely alliances weighing in.
That gives us time, if we choose to use it, to consider what a non-kludgey system of clergy compensation might look like, and to set about transitioning from the current constitutional and financial mess to something more elegant, equitable and efficient.