GOP scrambles to fix unwitting tax on churches
Republicans tax churches to help pay for big corporate giveaway. You would be forgiven for thinking that this is a headline from The Onion or the fantasy of some left-wing website. But it’s exactly what happened in the big corporate tax cut the GOP passed last year. Now — under pressure from churches, synagogues, and other nonprofits — embarrassed leaders of a party that casts itself as religious liberty’s last line of defense are trying to fix a provision that is a monument to both their carelessness and their hypocrisy.
The authors of the measure apparently didn’t even understand what they were doing — or that’s their alibi to faith groups now. It’s not much of a defense. And the fact that Republicans increased the tax burden on nonprofits, including those tied to religion, so they could shower money on corporations and the wealthy shows where their priorities lie.
At stake is a provision in the $1.5 trillion Tax Cuts and Jobs Act of 2017 that directed not-forprofits of all kinds — houses of worship, but also, for example, universities, museums and orchestras — to pay a 21 percent tax on certain fringe benefits for their employees, such as parking and meals.
The new levy that would hit the “armies of compassion” former President George W. Bush liked to extoll would raise an estimated $1.7 billion over a decade.
That’s a vanishingly small amount in the scheme of the GOP’s deficit-inflating tax extravaganza, but it’s revealing. To lower the price tag of their confection for the wealthy, Republicans effectively hiked taxes on all sorts of other people and entities — most controversially, by sharply curtailing deductibility of state and local taxes. This was another two-faced move from a party that regularly assails “unfunded federal mandates” and lauds the importance of state and local problem-solving.
GOP leaders are now telling representatives of religious organizations that they had no intention of taxing them. They were focused on what they saw as liberal bastions in the third sector: universities, foundations and the like.
But this excuse only makes the story worse. It shows how slipshod the architects of this tax bill were, and it demonstrates their deeply partisan motives. After all, limiting the state and local deduction raises taxes far more on middle-class and well-off taxpayers in Democratic states than on their counterparts in Republican states. No wonder Republicans suffered such heavy losses in last month’s House elections in states such as California, New Jersey and New York.
The religion tax, as one might call it, is a nightmare for many houses of worship, particularly smaller ones.
“Requiring these organizations to pay a federal tax on these employee benefits, something they have never been required to do before, will cause them to not only face an increased operating cost, but also an administrative burden,” wrote Sens. James Lankford, R-Okla., and Chris Coons, D-Del., in a Nov. 27 letter to Treasury Secretary Steven Mnuchin.
They asked Mnuchin for a one-year delay in implementing the provision to give Congress time to fix it. And the two senators — who will co-chair the National Prayer Breakfast in 2019 — nicely captured the absurdity of this tax “reform” by noting: “Eating a meal with the homeless in their shelter should not be a taxable benefit for their employees.”
Republicans have relished attacking Democrats as secularist foes of religion and religious people. You’d thus think they might put a little care into how their legislation might affect religious groups. They didn’t. As Nathan Diament, public policy director for the Union of Orthodox Jewish Congregations noted, the parking and meals tax “breaches a longstanding principle that we protect our houses of worship from state entanglement in their operations.”
In their final weeks of unified control of Congress, the GOP would like to push through a new tax bill that in its House version comes in at roughly 300 pages. After some reluctance, Rep. Kevin Brady, R-Texas, the outgoing Ways and Means Committee chairman, added a provision ending the religion tax.
But in an interview, Coons said that the only tax legislation with any chance of getting enough Democratic support to pass the Senate would involve a small number of bipartisan measures, including, he hopes, scrapping the not-for-profit tax. Bigger fixes to the GOP’s tax monster will have to wait.
If this Congress fails to act, House Democrats should make repeal an early priority. It would be illuminating to hear Republicans respond to Democratic speeches praising religious congregations and their indispensable work on behalf of charity and justice.