Religion-Based Tax Breaks: Housing to Paychecks to Books

October 11, 2006


Source: The New York Times

For tens of millions of Americans, the Rev. Rick Warren is best known for his blockbuster spiritual guide, The Purpose Driven Life, which has sold more than 25 million copies; his success as the founder of the 22,000-member Saddleback Church in Lake Forest, Calif.; and his efforts on behalf of some of the worlds neediest people.

But for tens of thousands of ministers and their financial advisers Pastor Warren will also be remembered as their champion in a fight over the most valuable tax break available to ordained clergy members of all faiths: an exemption from federal taxes for most of the money they spend on housing, which typically represents roughly a third of their compensation. Pastor Warren argued that the tax break is essential to poorly paid clergy members who serve society.

The tax break is not available to the staff at secular nonprofit organizations whose scale and charitable aims compare to those of religious ministries like Pastor Warrens church, or to poorly paid inner-city teachers and day care workers who also serve their communities.

The housing deduction is one of several tax breaks that leave extra money in the pockets of clergy members and their religious employers. Ministers of every faith are also exempt from income tax withholding and can opt out of Social Security. And every state but one exempts religious employers from paying state unemployment taxes reducing the employers payroll expenses but also leaving their workers without unemployment benefits if they are laid off.