December 23, 2010

Time To Change My Job Description

Take two hypothetical people. And when I say "people," what I really mean is "taxpayers." Let's call these folks "Attorney Alice" and "Minister Mike."

Attorney Alice works for the law firm of Nasty, Poor, Brutish & Short LLP, which pays her $105,000 a year in salary and structured bonuses.

Minister Mike works for Innocuously Bland Protestant Ministries of Springfield, which pays him $105,000 a year, in the form of a $40,000 annual salary and a $65,000 annual "housing allowance."

Neither of these hypothetical characters receive any additional benefits like contributions to retirement accounts or health insurance; both are the sole breadwinners for families of four; both are homeowners; and the above exhaustively describes the money coming in to both of their households.

What's the result? Attorney Alice pays $24,576 in state and federal income taxes. Minister Mike, who you will recall brings home the exact same amount of money, pays only $1,540 in federal and state income taxes -- one-sixteenth of Attorney Alice's tax burden.* Read all about it from the tax preparer's perspective. (Via.)

I'm sure you can guess which one of the two asked for a discount on the tax preparer's fee.

You don't need to be an atheist to see that this result is unfair. It might help to be a lawyer or an accountant, though, to see a Constitutional problem. See, in law school, I was taught that the tax code is written the way it is so that the government can encourage certain behaviors and discourage other behaviors. This example illustrates a powerful incentive for people to pursue careers in religious ministries. That, in turn, would seem to represent a clear preference by the government for religion over non-religion, which when expressed thusly rather clearly violates the Establishment Clause. (See, e.g., Board of Education of Kiryas Joel Village School District v. Grumet (1994) 512 U.S. 687, particularly the phrase "...a principle at the heart of the Establishment Clause, that government should not prefer one religion to another, or religion to irreligion.")

Now, I don't really have a problem with the government choosing to say that the ministry is a public service profession. I'd readily agree that most ministers, in most settings, provide a variety of benefits for their communities. That they could do so in a secular fashion is irrelevant; they can do so in a religious context and they may express their professional activities as being part of a set piece inseparable from their faith and theological beliefs if they so desire. I don't get to choose your religious ideas for you and if your faith gets you to behave in a noble, morally good fashion that benefits your community, I've no cause to object.

What I want, though, is equality before the law. I, too, am engaged in a public service profession; I assist people with their social problems; I guide them through tough times, I hold their hands while they cry, and I give them advice to help resolve disputes. I am significantly more accountable to the public and significantly more regulated by the public in the practice of my profession than the minister is in his; I am thus even more burdened in the practice of my profession than the minister, all other things being equal (the key equality here being gross income).

So if a minister gets to knock more than half his income out above the line and double-deduct things like mortgage interest, property taxes, and homeowners' insurance, then I should be able to do that, too. It's not fair that because I base my guidance in dispensing that advice from books of law, and the minister bases his guidance on an ancient holy book, the government should treat him better than it treats me when it comes time for us to pay our taxes.

Maybe I should call myself a "minister of judicial dispute resolution" instead of "attorney."

And while I'm on the subject of Establishment Clause violations, I just have to recognize and give thanks to Dan at Bleakonomy for a very amusing shout-out. Merry Christmas, dude.


* To be fair, Minister Mike in this example opted out of Social Security and Medicare taxes, and therefore will not be entitled to participate in those benefit programs upon his reaching retirement. Attorney Alice is legally required to participate in Social Security and Medicare.

4 comments:

A Teacher said...

Could you negotiate a similar compensation with one of the partners? Supposing you make $200k a year as lawyers out there in Californ-i-ay, why not see if the practice can change you from a current salary, to one where your salary is 50K and the other 150k is your housing and living allowance, which you can then bill back to them with various recipts for groceries, mortage payments, etc etc. That would lower your burden too wouldn't it?

I just don't see where many employers, unlike a church, would want to get into keeping track of all that.

scottgreene said...

Your comments describe what is wrong with today's Income tax system. At best it is erratic and at worst it is psychotic.

Inhabitants and businesses of this country spend billions of dollars a year and then spend billions of hours in attempted tax compliance. This just to figure out what they owe or don't owe in Income taxes.

The Income Tax code itself is made up of 9,834 sections comprising more than 16,845 pages of arbitrary and contradictory laws and opinions.

This plus an additional two-and-a-half million more pages of Income Tax Regulations, Income Tax Revenue Rulings, Income Tax Letter Rulings, Income Tax Memorandums, Income Tax Publications, plus Tax Court, Appeals Court and Supreme Court Opinions. These are all written in an effort to explain and/or argue about the mind-numbing Income Tax laws.

Most personal, financial and business decisions all have to take into account this Income Tax system and generally require assistance from tax accountants and tax lawyers who all have different opinions on how to use and take advantage of the Income Tax legal code.

Most government officials do not understand the Income Tax code (try calling them up and getting a consistent answer to the exact same tax question – good luck on that).

If you are ever the victim of an Income Tax Audit based on the income and deductions you reported on your personal and/or business Income tax return, it could easily cost you thousands upon thousands of dollars to defend yourself.

The Income Tax laws are written so that you are automatically guilty and you must prove your innocence. Thus you have to ‘prove your innocence’ against an Income Tax system that contradicts itself within its own code.

Every single inhabitant of the country is required by law to keep an accounting of their yearly income and deductions (for the Income Tax) and is required by law to maintain ongoing lifetime balance sheet and net worth calculations (for Estate and Gift taxes)

This accounting is subject to government scrutiny and must be proveable.

So the psychosis of this Income Tax system is embedded in every single facet of your life, from the government to the courts to tax lawyers to tax accountants to financial advisers.

Unless something is done to get rid of this “system”, the current Income Tax scheme is going to continue to wreak financial havoc on the United States economy and its inhabitants.

Mark said...

I gotta be honest, as a Christian and potential future minister (I'm an elder candidate) I don't really understand the point of tax incentives to churches or ministers. I've also seen churches abuse the idea of housing allowances with stuff like, "Yeah, it looks like he's making way more than he probably should, but some of that is a housing allowance."
I've seen some pastors get in a tizzy about the potential lost of tax-exempt status. But I don't understand why they think they deserve it in the first place. Last I checked the state didn't treat the early church too well.
Anyway, I stopped by your site again because I've got my first scheduled sermon this Sunday, and because we're working our way passage by passage through Mark, I ended up with one of the passages you listed in your 10 most offensive passages in the Bible post. Maybe I'll post a link to it after the fact.
Cheers.

Transplanted Lawyer said...

Good luck, Mark! I'm sure you'll do a good job. Come on back when you can!