The year 2014 is a watershed year for federal and state tax laws. The highest tax bracket for 2013 income is now taxed at 39.6%, but long-term capital gains tax for small-business owners in the highest tax bracket decreased from 20% to 15%. States and localities, in cohorts with the United States Congress[i] and aided by the United States Supreme Court[ii], have pursued increased revenues through aggressive collection of sales tax by online retailers, even passing laws providing for “click-through-nexus.” The most controversial of all tax changes in 2014, arguably, is related to the implementation of PPACA. In addition to the 3.8% Medicare tax in 2013, the PPACA levies an extra 0.9% tax on wages or salaried income above $200,000 for a single filer and $250,000 on joint filers. According to the National Federation of Independent Business, taken together, these two provisions result in $318 billion in new federal tax revenue from 2013 to 2022.[iii]
Small business bear a heavy load under new PPACA taxes, not receiving the same benefits of delayed implementation given to larger corporations. Small businesses who meet narrow, graduated qualifications, however, are eligible for an increased temporary tax credit to offset costs of qualified healthcare coverage for employees. More onerous, though, is the purported $8 billion small business health insurance tax. In 2014, a tax will fall on health insurance plans purchased in the fully-insured market. While not technically a tax on small businesses, the tax on insurance carriers’ fully-insured market share – a market largely insuring small businesses – will undoubtedly pass to small businesses in the form of higher rates.[iv]
No discussion of the PPACA tax implications is complete without mention of the individual mandate and its tax penalty for uninsured persons. The infamous 2012 United States Supreme Court ruling in National Federation of Independent Business v. Sebelius set the stage for the implementation of the individual mandate by declaring constitutional the statutory penalty for not having health insurance as a legitimate exercise of Congressional taxing authority. So, every American, with few exceptions, must have public or private health insurance by March 31, 2014, or face a tax penalty of various grades. In 2014, the tax penalty is the higher of $95 per person (or $285 for an uninsured family of 3 or more persons) or 1.0% of taxable income. The tax penalty rates increase substantially in 2015 to $325 per person (or $975 per uninsured family) or 2.0% of taxable income, with even higher increases in 2016.
The increasing complexity of tax law from PPACA alone will result in increased compliance costs for businesses and individuals in 2014. The Christian businessman will seek, rightly, to limit his tax burden, but how far should one go in lessening taxes paid to state and local government? Should the Christian businessman refuse to pay taxes under the PPACA in protest for what those dollars may fund, such as abortion? How aggressive can the Christian businessman be in asserting creative legal arguments for exemption from unwieldy tax laws? Luckily, the Scriptures offer guidance for the Christian seeking to honor God, while keeping the tax man at bay.
First, Christians are to submit to the governing authorities out of reverence for God. The New Testament teaches that civil government is an institution ordained by God. The infant church of Rome received instruction from the Apostle Paul that “every person [is to] be subject to the governing authorities. For there is no authority except from God, and those that exist have been instituted by God.”[v] Apostle Peter similarly wrote, “Be subject for the Lord’s sake to every human institution, whether it be to the emperor as supreme, or to governors as sent by him to punish those who do evil and to praise those who do good.”[vi]
Dr. R. Albert Mohler, Jr., President of The Southern Baptist Theological Seminary, observes that “the background of this [admonition] is the sovereignty of God over all things. God retains his absolute sovereignty, but he delegates some degree of rightful sovereignty to human rulers, governments and, institutions who are, in return, accountable to him and judged by him.”[vii] While there are legitimate limits to submission to governing authorities, such as forced idolatry, Dr. Mohler continues, “by such faithful acts [as submitting to the governing authorities], Christians ‘may silence the ignorance of foolish men’[viii] and be found as good citizens.”[ix]
Second, Christians are to pay taxes out of obedience to God. Taxes were controversial in Jesus’s day, too. In Matthew 22:17, an enemy of Jesus asked, “Is it lawful to pay taxes to Caesar, or not?” Jesus responded by pointing to a common coin, noting the image of Caesar on the coin and saying, “Therefore, render to Caesar the things that are Caesar’s, and to God the things that are God’s.”[x] Apostle Paul takes up the Lord’s teaching in Romans 13 when he says submission to governing authorities out of reverence for God requires the Christian to pay taxes out of obedience to God: “For because of this [to avoid punishment for wrongdoing and for sake of conscience] you also pay taxes, for the authorities are ministers of God.” Governing authorities have God-given duties that require the collection of taxes and Christian citizens should pay taxes willingly in obedience to God.
Third, Christians are to pay only the taxes due. While Christians are to pay taxes willingly in obedience to God, they are only to pay what is due the government, and nothing more. Again, the Apostle Paul in Romans 13:7: “Pay to all what is owed to them: taxes to whom taxes are owed.” Christian businessmen and individuals can, and at times certainly should, seek to minimize their tax burden in a lawful manner. Particularly given the religious liberty concerns of the PPACA, Christians in the United States should seek to hold their government accountable to their constitutional and divine responsibilities. There is no obligation on the Christian to pay taxes simply because a republican government levies the tax. The only tax due is the final, legally-determined tax owed.
The implementation of PPACA and related tax implications offer the Christian businessman a discipleship opportunity – growth in knowledge, strategy and integrity, to the glory of God. Business and taxes, as all of life, are a crucible for discipleship for the follower of Jesus Christ. The Christian businessman, out of reverence for and in obedience to God, should submit to governing authorities and pay taxes due and nothing more.
Sam Webb is an attorney and consultant at a corporate tax advisory firm in Washington, D.C., where he lives with his wife and daughter. He serves Grace Baptist Church of Arlington as Deacon of Services and pursues theological studies through Reformed Theological Seminary. He can be reached at email@example.com