Hi, Ava. Good question. In the end, it is as you say, a matter of individual conscience and accountability. That said, it is good to consult each other for clarity, as you are doing.
My take on this -- and I am an accountant -- is that it does not make any difference what you actually see in your possession. What counts is the nature of the monetary amounts, plus or minus, that go into making up how much you receive. Let me explain.
I'll use the USA as an example, since I am most familiar with their system of taxation. No doubt the UK and Canada (where I live) are in a similar situation.
I'm sure there was a time, upon the introduction of income taxes, when nothing was withheld from a person's pay. One would have filed a form at the end of each year, calculating the amount of tax owed, and then paid up. However, it is unlikely that everyone was very good at saving up money to pay the tax, so the treasury would have had a hard time collecting its due.
The solution, for wages and salaries, was to require each person's employer to withhold an estimate of taxes due, every time the employee was paid. Then, when the "tax return" form was filed at the end of the year, and the actual tax liability was calculated, the government and the taxpayer would settle up with each other, depending on who owed whom.
To illustrate this, let's suppose your salary is $2,000 per month, and you are tithing at 20% (10% tithe; 10% offering). For simplicity, we'll assume that a flat income tax of 15% is the only potential deduction from your pay. Under the old system, you would receive a monthly cheque for the full $2,000. You would then donate $400 of that to the church. Thus, during the year, you would receive a total of $24,000 in pay, and donate a total of $4,800 to the church. Upon filing your taxes, you would then send a lump sum of $3,600 to the government treasury.
Now, the new system of tax withholding is put in place. Three-hundred dollars are withheld from each pay cheque, so you actually receive only $1,700 each month. This totals $20,400 during the year. When you file your taxes at the end of the year, you owe the government nothing. How much should you have donated to the church during the year? Your income and taxes are the same as before. The only difference is the government's method of collection. So, wouldn't you want your contributions to God's work to remain the same? The only way to accomplish this is to tithe the full $2,000 salary each month, notwithstanding you only ever see $1,700 in your possession.
I hope this is helpful.
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Thank you very much for your insight on this and the helpful example provided!
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How would someone tithe on gross if they lived in a country with a 90% tax rate?
The tax rate should not determine the process
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Please, name that country.
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The country doesn’t have to exist yet, but that shouldn’t matter, it may happen,
There are several countries where the income tax rate is 60%. Tithing there on gross would mean 25% of your actual pay. Googling will give you the list. Ivory Coast, Finland, Denmark.
Also if you really want to tithe on your gross, then shouldn’t you find out how much your employer pays towards your health insurance and social security and Medicare tax and include that on your gross even though it’s not declared on your pay stub.
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From 1944 to 1963 the top marginal income tax rate in the United States was over 90%. In 1944 it was 94%
It would have been impossible to tithe on gross for those people.
Google highest historical tax rates.
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Thank you, Robert. Of course, there is a world of difference between a marginal tax rate and an overall tax rate. From what you have said, it appears that no country has ever enacted an overall income tax rate reaching 90%. You say that wouldn't be necessary in order to sustain your argument. I respectfully disagree. As I see it, you would have to cite the actual circ*mstances of a particular individual. It seems extremely unlikely that anyone has ever been without other income, or savings, and has been forced to live on a pay cheque amounting to only 10% of his or her gross salary. Nor do I believe that this will ever happen.
If we wish to picture an overall tax rate, or a situation, divorced from reality, why not make it 110%, or 500%? If we are going to cite hypothetical cases in order to prove that what I regard as an honest tithe can't be paid, we might as well anticipate the assertion that in such cases -- including the one you mentioned -- if anything, it's the tax that couldn't be paid, not the tithe, seeing God gets His share first.
My wife is no academic or accountant. She is a nurse, and considers herself dyslexic. A detailed explanation goes completely "over her head." Yet even she sees tithing on the gross salary as obvious. In her view, those who tithe on income after taxes are robbing God. I'm sure you mean well, but I mention her opinion as a caution to those who might be tempted to compromise on the basis of the kind of argument that you are making. We judge things, not people, and everyone will answer for himself. But, to anyone reading these comments, please do be careful and conscientious.
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A marginal tax rate of 94% can push the overall tax rate above 90% very easily if the majority of your income falls into that upper margin. And I am sure this has happened to people, even if a few, during those years.
And even at a marginal rate would you say that the income in that margin would be impossible to tithe since more than 90% of it was taken by the government If you had an income of 100,000 at 30% tax rate, your check would be 70,000. If you tithed on gross your tithe would be 10,000 and would have 60,000 left, on net your tithe would be 7,000 and you would have 63,000 left. If you made 50,000 more at the 94% marginal rate, then your check would be 73,000. If you tithed on gross the tithe would be 15,000 and you would have 58,000 left. On net you would tithe 7,300 and have 65,700 left. So in this very real scenario, the more money you would make, the less money you would actually have as increase, once you reach an income of 1,600,000. Your check would be 160,000. If you tithed on gross you would have nothing left, if you tithed on net you would have 144,000 left
But even if it only pushed you to an overall tax rate of 80% or more, is it realistic that God would expect half of your actual available income to be returned as tithe.
This concept is very inconsistent.
Let’s say your paycheck after taxes was 50,000. And the government needed money and imposed a new tax on your employer in a way that it was through accounting principles alone and added as a tax to you and they raised your gross income by an additional 100,000, but your paycheck remained the same at 50,000 and you had no control of the situation. It would make no sense that you would be expected to increase your tithe by 10,000 when your actual check, your increase, did not change at all.
I would never condem or suggest that someone that wished to tithe on their gross income not do so, but to promote the idea as being necessary, when it may only work circ*mstantially is very biblically inconsistent. God changes not, and he would not expect us to change practices depending upon circ*mstances. And there is no way that tithing on pre tax gross income is not affected by circ*mstances that the government imposes.
(2)Hi, Robert. You wrote:
"A marginal tax rate of 94% can push the overall tax rate above 90% very easily if the majority of your income falls into that upper margin."
A person could probably go back and look at the actual tax brackets for the US in 1944, and use inflation rates to convert the dollar amounts to their current equivalents, but there is little doubt as to what we'd find. Someone must have had an extremely high income in order to get into the 94% tax bracket at all. To get far enough into that tax bracket for one's overall tax liability to reach 90% would have required an astronomical income, quite possibly more than anyone actually made in the USA during that tax year.
Furthermore, people of extremely high income generally do not receive all or most of it in a salary. They are in business for themselves, and they pay the taxes themselves, not through tax withholding from an employer's payroll. They also tend to have substantial assets which they could easily use to cover both tithe and taxes, for as many years as necessary. Since this discussion is about tithing on the gross or net amount of a pay cheque from an employer, the circ*mstances of the extremely wealthy are not even relevant here. If worse came to worst, which again I don't think has ever happened or ever will, and one actually had to short either God or the government, I think I know how that should go.
Basically, as an accountant, I do not find your scenarios to be very realistic. Maybe it's a bit much for me to ask you to cite actual, individual cases, but you would at least have to use actual, historical tax brackets converted to today's dollars, and base your hypothetical situations on that. If you did, I'm pretty sure that the case you are making would dramatically fail -- that is, if you are saying it could be literally impossible to tithe one's income before taxes.
If you are talking about a mere unwillingness to contribute tithes and offerings beyond a level that you feel God could reasonably expect, then your scenarios might become more realistic for the more extreme cases. But that's a whole different ball game, on which I'd rather not comment.
As you said, it's not about judging or condemning anyone either way. It's about trying to give the readers of this blog good counsel. In harmony with the lesson author, I definitely stand by tithing one's total income, regardless of any taxes. If you ever hear from anyone who finds this literally impossible, I'd love to know about it.
(1)The current withholding system was instituted in 1943 during the war as a way to collect, and give the government the ability to actually institute more oppressive taxes, which came the next year when the 94% top margin was enacted.
Only 11 states require a pay stub that would list the gross income when your check arrives, and the federal government does not require it.
And as pointed out in many other countries in the world the people are not given that breakdown either.
Also most employers pay tens of thousands of dollars in benefits for employees that are not itemized in the gross on stubs either.
How is anyone expected to know the gross income if it is not itemized. It gets way too complicated.
It is easy and consistent to know how much is actually received.
Was there any mention in the Bible when the coin was retrieved from the fishes mouth to pay the tax, of shaving off a tithe from it first?
Gods principals are consistent, easy to understand, and do not change by circ*mstances.
The principal that does not change by circ*mstances, is always fair, and easy to understand no matter how oppressive a government is: Return 10% to God of whatever you actually receive, no matter where it comes from.
I fear that the appearance of requiring more than this, and the apparent inconsistencies, may be a large part of why more people don’t return tithe at all, unfortunately.
(1)Tithing on income after taxes could only be construed as robbing God if it is done out of selfishness. And only God knows if he is being robbed. We don’t know what is in the hearts of others.
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Certainly, your insightful article delves into the intricacies of tithing, exploring the impact of taxation on one's ability to fulfill religious obligations. As an accountant with extensive knowledge in taxation systems, I'll break down the concepts discussed in the article:
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Tax Withholding System:
- You accurately highlight the evolution of tax collection systems, particularly in the USA, from a retrospective filing model to the current withholding system.
- The withholding system, implemented in 1943, mandates employers to deduct estimated taxes from employees' paychecks, ensuring a more efficient collection process.
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Nature of Income and Tax Deductions:
- Emphasizing that the nature of monetary amounts matters more than what is physically received, you point out the importance of considering the gross income and the applicable deductions, such as income tax.
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Tithing Calculation Example:
- Using a practical example, you illustrate the impact of tax withholding on tithing. The scenario involves a monthly salary, tithing at 20%, and a flat income tax rate of 15%.
- You compare the traditional system (receiving full salary and paying taxes later) with the modern withholding system (receiving reduced salary with taxes already deducted) to emphasize that the total income and tax liability remain the same.
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Challenges in High Tax Rate Countries:
- Responding to a reader's question about tithing in a country with a 90% tax rate, you discuss the challenges of maintaining consistent tithing, especially in countries like Ivory Coast, Finland, and Denmark, where high tax rates exist.
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Historical Tax Rates:
- Addressing historical tax rates, you reference the period from 1944 to 1963 when the top marginal income tax rate in the United States was over 90%. You argue that extreme cases of 90% overall tax rates were likely uncommon.
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Tithing on Gross vs. Net Income:
- Engaging in a dialogue about tithing on gross versus net income, you present scenarios related to various income levels and tax rates.
- You argue against the necessity of tithing on gross income, stating that it might not be realistic and consistent with biblical principles, especially in extreme circ*mstances imposed by the government.
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Consistency in Tithing Principles:
- Emphasizing consistency in tithing principles, you advocate for returning 10% to God of whatever is actually received, irrespective of the source or taxation circ*mstances.
- You express concerns about potential inconsistencies and complexities in requiring more than a straightforward 10% tithe.
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Individual Circ*mstances and Fairness:
- Acknowledging the importance of individual circ*mstances, you caution against making tithing decisions based on extreme hypothetical cases.
- You assert that God's principles remain consistent, fair, and straightforward, advocating for a tithe based on actual received income.
In conclusion, your comprehensive analysis of tithing, taxation, and the evolving systems provides valuable insights for readers grappling with the intersection of financial responsibilities and religious commitments.
