What Tax Folks (and Kyle) Talk About When They Talk About Tithing

Yesterday, I saw this tweet from Jana Riess:

The catch: younger members are more likely than their elders to say they’re paying tithing on net, rather than gross, income.

The question of why younger generations are more willing to cop to paying 10% of their net income is an interesting one, and I have no idea if it reflects changes in religious rhetoric or in their financial situations. For that matter, I have no idea if it actually reflects a shift: maybe Mormons have always moved from net to gross as they’ve aged.

What’s clear, though, is that few people, if any, are actually paying tithing on their gross income. I tweeted to that effect, and got into a fun rabbit hole of a Twitter conversation. So, for your reading pleasure: What Tax Folks (and Kyle) Talk About When They Talk About Tithing:

 

Comments

  1. Best thing I’ve read on taxes in a long time!

  2. I guess this means I’m gross, but not totally gross.

  3. EnglishTeacher says:

    I was thinking about this today, and how nice it is to have it left to one’s discretion. Growing up, I often heard from (older) adults in lessons that one should pay on the gross. I guess this is easy enough to tell people who are still several years away from holding jobs. Upon entering adulthood, and encountering the joys of taxation and union dues, those lessons have all but stopped and I have paid on the net since entering the workforce. It is 1. easier to calculate when you have the number on a check right there and don’t have to hunt for it on a stub and 2. frankly, affordable. I guess I have neither the faith nor the funds to pay on the gross. But, based on the twitter responses to what constitutes the gross, perhaps I will never know what it actually is.

  4. I always assumed “pay on gross” meant to tithe the first $144 you make and that’s it.

  5. The click-baitier title would have been, “Why I don’t tithe on gross (and you don’t either, and if you think you do, you’re a liar)”

  6. Andrew, from now on I’m going to have to message you before I title my posts!

  7. And EnglishTeacher, I’ve noticed the shift, too. I do appreciate that we’ve (largely) moved away from rhetoric identifying tithing as a clear, easy commandment to one that allows us to wrestle with the messiness of life.

    And yeah, you’ll probably never know what your actual gross income is. Partly it’s a definitional problem—how do we define income? using our tax returns? or Haig-Simons income? or something else?—and partly it’s that, whatever it is (other, maybe, than tax return “gross income”), it’s really hard to calculate. It’s ultimately calculable, but it’s probably not worth the effort.

  8. N. W. Clerk says:

    U.S. Code, Title 26, Subtitle A, Chapter 1, Subchapter B, Part III specifically excludes from “gross income” items that Sam seems to include in his absolutist definition (such as certain gifts and fringe benefits). I know lots of Mormons that pay tithing on the government’s definition of gross income. They are probably not too concerned that they don’t pay according to Sam’s gross definition.

  9. N.W. Clerk, nobody pretends that the tax definition of gross income is economic gross income; in the tax law, we make allowances for things ranging from political preferences to administrative convenience. Most tax people and economists view gross income as constituting Haig-Simons income; essentially, every increase in value is income.

    I mean, you’re certainly welcome to pay taxes on your tax gross income, but you’re going to have to work to convince me that in the 1838 revelation instituting tithing, the “interest” that revelation told us to pay tithing on had any relation to the federal income tax c. 2016.

  10. John Mansfield says:

    Pay statements have a line labeled “gross” and another labeled “net.” For the most part, that’s all the non-accountants are talking about.

  11. NW Clerk, if we relied on U.S. statutory definitions then increase would not be synonymous with income, despite what the first presidency may say.

  12. John, a couple things: (1) It’s not just accountants. I’m not an accountant. Like most tax attorneys and economists, I don’t think of income in terms of tax definitions. And (2) so what? That people aren’t sophisticated in thinking about their income doesn’t mean that I, and my friends, should be.

  13. For my part, I’ve concluded that increase as understood by Joseph meant a positive change in net worth.

  14. Those of us who are self-employed are certainly aware of the differences between “gross” income and actual gross income. Subtract health insurance, matching 401k contributions (what’s the self-employed comparison to that?), the employer’s share of social security, etc. etc. That’s easily 15-20% of “income” that people who think they pay tithing on gross conveniently ignore.

    Obviously business costs are subtracted. The amount I spend on office space and advertising is not part of gross income.

    It’s much more difficult for me to figure out what exactly 10% is. There’s no way for me to figure out what I’ll owe before the end of the year, so tithing settlement in December doesn’t work too well. February tithing settlement would be so much easier.

  15. That’s a good point, Tim. Our using an annual accounting period is useful, but artificial. Really, in the end, it would make the most sense to calculate lifetime income at death, and pay on that. That would take into account gains and losses.

    It would also be administratively difficult (I mean, not impossible, but pretty close), and it wouldn’t provide the steady stream of revenue that the church needs to function.

  16. And just to muddy the water a bit more… this discussion seems to assume that all church members paying tithing on gross income (as defined by the US tax code) are American citizens paying American taxes.

    How would this discussion be different if we were including members living in different countries in the discussion?

  17. I believe that tithing was meant to be simple: 1/10 of what comes into your hands.

    That is what I pay, 1/10 of what comes into my hands, plus things like the FSA, that we USE every year that are “before taxes.” I did NOT pay on 401K deposits or SS withholdings while I was working, but now that I am retired, I pay 10% of my SS check. We pay 10% on a pension check my husband receives. When we start to withdraw from the retirement accounts, I will tithe on the withdrawals. Personally, I will pay tithing until I die, because I believe that is how it was meant to work, & that is fine with me, because I am not willing to try to figure out how much interest accrued here, & how much there, since I last tithed the amount in retirement accounts x,y,& z, or how much my employers contributed to my SS. When we have a great harvest year in the garden, I increase my fast offerings, since the bishop no longer receives foodstuffs as tithing. this is what I feel good about, & that is the bottom line.

    I believe the Lord meant it to be simple, & for me it is.

  18. Amanda in Paris says:

    French citizen here. You never hear the gross vs net debate here. I think the difference is so great between the two that everyone knows they couldn’t afford to pay on their gross.

    To give an example, a lowly salaried employee like me currently has a little over 25% taken out of my pay taken out. This will change as France voted to include income tax in this (as opposed to paying it separately (which is going to hurt!!)).

    I work for lawyers who have self-employed status here. 50% of their gross is taken out.

    So we never have this discussion.

    Hope that makes sense, it’s hard to explain in English.

  19. Amanda in Paris (et al) I suspect that differences in tax and other withholdings around the world are indeed an important reason we seem to hear less about gross vs net or any other definition of increase (than I did when I was young). However, the sense of difference may easily be exaggerated. Numbers like you describe in France would be familiar to U.S. taxpayers, and the OECD statistics (without doing a lot of work to see what’s behind them) show the difference between average wages (i.e., “gross” in this discussion) and average take home (i.e., “net”) is *greater* in the U.S. than in France, U.K., or Sweden (not randomly selected). These aren’t fair comparisons. A significant part of the difference is withholding taxes (U.S.) or PAYE (UK) or not yet implemented tax withholding (France). Another big difference is the relative importance of VAT (which does not affect take-home pay directly) in a country’s tax revenues. However, the bottom line is that U.S. Mormons talking about tithes on gross vs net are in fact talking about big numbers relative to their income.

  20. Huh. I guess everyone has their own way of totting up the butcher’s bill. I know for a fact that back in the day, my grandmother used to calculate the market value of the produce harvested from her family’s garden–not just the stuff they sold (they were farmers), but what they kept to eat too–and payed 10% of that in cash as part of her tithing.

  21. Sam, re: “increase in value” — I’m surprised no one in this discussion seems to have noted that an increase in dollar (or other currency) valuation does not represent an increase in value without first discounting it for inflation. Of course, there have been many periods in which neither the taxing authorities nor the tithing bean counters would be particularly happy with the result. It seems while “gross” is often not economically calculated “net” is also often insufficiently defined: net of what? I’m with Marivene on folks tithing on what they “feel good about” though not necessarily with her on the method she feels good about. Any attempt to actually calculate “increase” and when it should be recognized is for many hopelessly complex.

  22. Kevin Barney says:

    I think people should simply do what makes sense to them. It’s their money and their commitment, and even the Church itself as an institution disclaims trying to define the particulars. As the OP makes clear, simplistic appeals to gross v. net are not the end all and be all so many assume them to be.

  23. People, people, let’s not over complicate this. Do like me: pay your tithing at City Creek Mall (the church conveniently puts many locations to collect), and in their gratitude, the church will give you a nice parting gift.

  24. Can I get a carryover credit for all the years my increase was negative?

  25. EBK — I was about to quip “just blessings in heaven” but stopped to think that it’s a good question (carryovers) illustrating that most talk about tithing references a cash method wage earner on an easily defined calendar year. But lots of us don’t fit that model and the complexity skyrockets. Good thing nobody has to or is authorized to answer your question! (But for myself, and several others I know, carryback and forward, both of increase and of tithing, seems perfectly reasonable.)

  26. Indian Nickle Mike says:

    I once considered myself a 100% lifetime tithe payer on gross income. That was until my wife was “born again” and wanted to go to a more Christ-centered church and became convinced we Mormons were anything but that. We had previously experienced extreme conflict early in marriage over money. I was raised poor by depression-era parents and she was raised wealthy by liberal democrats. I constantly berated her for over-spending and lack of thrift. But my income was high. I realized one day the only way to avoid paying alimony was to give her control of our money and keep my big mouth shut and my eyes closed. This seems to work except I expect any day now (after over 30 years of marriage) she will come to me in tears with the news that we are bankrupt.

    For a recent example of how this works, last summer I went on a week long vacation to Florida with my brother. He paid for everything and gave my wife a bill for at least half of it behind my back which she promptly paid. I enjoyed the seemingly free vacation.They both told me it cost a little over $50, (snicker snicker) and that made me feel real good, even though I know it was a “stretcher.”

    The conflict over religion between us grew so intense we could barely have a civil conversation about anything. For few years I thought she was tithing to those d****d ministers and she would be d****d if she was going to sent it to Salt Lake. Like a good sensible person that she is, my wife put the money (10% of gross) in a tithing fund until such time as we could come to an agreement, invested in indexed, low-load mutual funds. A few years rolled away and by the time we could have a civil conversation, the tithing fund had grown to over $200,000. If you think a thrifty guy who wants to believe a week in Florida costs a little over fifty bucks, was going to cough up that kind of money to any church, then think again.

    I challenge you to sit down with a spread sheet and estimate life long income. Then look at living costs and such things as education, health care especially of aging parents, retirement, etc. What happens if you pay yourself an additional 10% first with a sensible savings plan and avoid consumer debt? Another one that really gets me (oldest daughter is buying their first home) is more and more young couples with growing families simply can’t afford the house payments in a neighborhood with adequate public schools. So add a big down payment for your children’s first home to the list. Most of the young couples in my neighborhood with its top public schools are drawing on inherited wealth to live here.The American middle class is rapidly shrinking; the rich are getting richer and the poor more numerous. Which side of that equation do you want your descendants to be on?

    The LDS church does not need any more money. They do need more strong, solid families, especially those with one-earner high incomes and stay-at-home mothers to keep the children in the fold (minimize assimilation) and to do all that church work for free. Investing your money (and your time) in your children will make the church stronger than paying tithing. I might be inclined to pay tithing if I (actually my wife) could better see how it is spent to make a difference for future generations and not potentially squandered.

    In other words, I think my wife can spend the Lord’s money better building Zion than the LDS church. Your mileage may vary.

  27. Render unto Caesar the things that are Caesar’s, and pay net on the rest.

    If Caesar decides not to pay his tithing, that’s between him and the Lord.

  28. Indian Nickle, I’ve said this a number of times, but tithing doesn’t ensure financial soundness. In fact, with ~10% less income, it absolutely requires us to be more careful with our money.

    That said, children’s tuition and retirement savings aren’t the equivalent of tithing, any more than, say, they’re the equivalent of gym membership. Tithing’s never convenient—when you don’t have much, it’s a huge chunk of what you need to live on, and when you have a lot, it’s a lot of money.

    But if you don’t want to pay tithing, you might as well just own it, rather than trying to justify that you’re doing good things with your money. Because yeah, you can certainly do good things with additional money, but the good things you do with it are not the same as the good things you do paying tithing.

  29. So do you think that people would pay on their gross, not net, if taxes weren’t with held from their paychecks, and was something that they’d have to pay in one annual lump sum?

  30. Nope. We’d still all pay on some choice of net income.

  31. charles Dowis says:

    The results may be tainted by poor controls. For example, did they control the sample foe such factors as “converts” vs “born in the church”

  32. Indian Nickle Mike says:

    Sam:

    I agree. I own it. I do not believe in tithing as it is practiced by orthodox members.

    I agree with many underlying principles piggy-backed onto tithing such as challenging yourself to manage money better, or minimizing debt. But the formula of where to assign charitable giving is in question for me, (actually my household). I agree that the good things we do with charitable giving is not the same as tithing. I think it is better than tithing.

    I don’t know that for sure because I really don’t know what happens to tithing money. Blind obedience, and six figures of money- not a good combination for me. If I did know and became convinced it was better than other charities and better than attempted self-sufficiency and helping family in crucial ways, then I might sign the $200k+ tithing fund over to LDS Inc. I can be both heretic and fanatic in the same 5 minutes.

  33. Single Sister says:

    I paid on my “gross” income for many years while I lived with my mother as she was ill. Then after she died I bought a house and held a mortgage. Doing the math, I realized that paying my mortgage and also being a “gross” tithe payer would not allow me to eat (amongst other things). So God and I had a long conversation, I prayed a lot and talked to my Bishop and other leaders in my area. The long and short – I now pay on my “net” income, but I also tithe on my income tax refund and any other cheques I get outside of my regular pay. God seems fine with it, which in the end is all that I care about.