One of the races that will determine which party controls the U.S. Senate next year is the Georgia contest between Republican Herschel Walker—whom we’ve recently learned fathered a number of children he kept secret , exaggerated his academic prowess and law-enforcement experience, and has made any number of confounding statements—and Democratic Sen. Raphael Warnock, the senior pastor at Ebenezer Baptist Church, the church Martin Luther King, Jr. used to lead. Making Walker look good is a tall order for the GOP. So how do you rough up Warnock instead? I’ve long argued that everything has a tax angle, and in this case Republicans have found one. They’re trying to discredit Warnock by challenging his acceptance of a “parsonage allowance,” a tax-free sum of money given by a religious institution to a minister for housing expenses. I’m no fan of the parsonage allowance, but these claims are cynical and misleading.
Let’s start with the accusations and innuendo. A recent Washington Free Beacon article accused Warnock of “dodging income taxes” through an “unusual financial arrangement” that’s “unavailable to the vast majority of Americans,” strongly implying that Warnock was acting unethically and that his behavior was somehow inconsistent with his alleged desire to raise taxes. While Warnock’s allowance was approved by the Senate Ethics Committee after he was elected in 2021, the Free Beacon article suggests that the arrangement violates a law allowing senators to earn only $30,000 in outside income. (Warnock’s allowance was $89,000 last year.)
Congress inserted the parsonage allowance into the tax code to let “ministers of the gospel” receive tax-free housing. Initially, it was limited to housing provided by a church. However, in 1954—the same year Congress inserted “under God” into the pledge of allegiance (“In God We Trust” was added to our currency in 1955)—Congress expanded the provision to include cash allowances that ministers used for houses they rented or owned. In this regard it differs from the generally applicable provision sparing in-kind, on-site housing an employee is required to live in from taxation. Think a lighthouse keeper in the days before automation. The housing isn’t compensation, but rather a condition of the job, and it would be bizarre to tax the lighthouse keeper on its value. This is quite different from giving ministers tax-free money to live in their own homes.
Let me start by saying I think that the parsonage exemption is unconstitutional. The First Amendment bars the government from both establishing religion and interfering with its free exercise. For years, the Supreme Court held that this meant the government should be neutral toward religion. The parsonage allowance affords ministers unique benefits that, as the Free Beacon article so helpfully notes, are not available to others, making it constitutionally suspect. I actually argued the most recent case on this issue, Gaylor v. Mnuchin, before the U.S. Court of Appeals for the Seventh Circuit, but to no avail.
I also think it’s terrible policy. The parsonage allowance is compensation, pure and simple, and as such it should be taxed. It treats ministers better than everyone else, effectively subsidizing religion. It also entangles the government in difficult religious questions, including what qualifies as a religion and who qualifies as a minister. In some faiths, such as the Churches of Christ, all believers are ministers, leading to basketball coaches, administrators, and, yes, even tax professors at religiously affiliated institutions like Pepperdine University and Abilene Christian University getting tax-free housing. If one were really concerned about the abuse of this allowance, limiting the allowance to those who work directly for churches and who actually serve as ministers, as commonly understood, would be a great place to start.
From a purely fiscal perspective, the government estimates in its “tax expenditure budget” that the parsonage allowance costs taxpayers about $12.1 billion over a 10-year window, money that could be used to pay for core government functions.
Having said all that, going after Warnock for claiming the allowance is rich. Countless ministers—including presumably those supporting Walker—take advantage of the provision. If folks on the right are concerned that the allowance is “unavailable to the vast majority of Americans” and therefore unfair, or that it improperly subsidizes religion, I welcome them to join me in lobbying for its repeal.
This is not a case of someone stretching the law or finding a questionable loophole. Chastising Warnock for receiving a tax-free parsonage allowance is equivalent to criticizing him for buying tax-exempt bonds and avoiding tax on the interest earned. That is hardly the “dodging taxes” suggested in that breathless headline.
That Warnock voted for a bill that “some analysts claim would increase taxes on low- and middle-income earners” does not mean that he forfeits the right to take full advantage of the existing provisions in the code. Essentially, the argument boils down to: If you think taxes should be higher, you should voluntarily pay more taxes than you are legally required to pay. That is asking too much. It would be akin to telling folks concerned about the deficit that they should abstain from taking any government support they are entitled to. Indeed, if they are so concerned about government deficits, they should voluntarily forego their own tax breaks, such as accelerated depreciation. My strong suspicion is that they would scoff at such a suggestion.
All of this is not to defend the allowance. I think it should be repealed. However, so long as it stays on the books, the effort to smear Warnock—and not the other hundreds of thousands of clergy who benefit from the same provision each year—should be seen for what it is.
