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-for-profits 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 on the “armies of compassion” former president George W. Bush liked to extol 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 have told 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 blue states such as California, New Jersey and New York evicted so many House Republicans last month.
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 Christopher A. 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 would 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 long-standing principle that we protect our houses of worship from state entanglement in their operations.”
In the final weeks of unified GOP control of Congress, Rep. Kevin Brady (R-Tex.), the outgoing Ways and Means Committee chairman, had hoped to pass a substantial new tax bill. After some reluctance, he added a provision ending the religion tax.
But in an interview, Coons said 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. And delays in the congressional calendar because of George H.W. Bush’s funeral might doom tax legislation altogether.
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.