In part I of this article, I shared how we have an obligation to support the Church and to assist with the needs of the poor (Code of Canon Law section 222) and that the Old Testament model of the tithe (ten percent) is an appropriate benchmark for us to use. In order to help you practically fulfill this obligation, I'd like to work through a couple of specific examples on determining the level of your giving.

Let's start with the basic situation of the Stewart family, where the husband receives an annual income of $40,000 and also participates in a bonus plan that depends on the profitability of the business. The bonus is calculated and paid at the end of the year. He also has a 401K plan in which the employer matches contributions made by the employee dollar for dollar up to 5% of his pay including bonus. The only other income the Stewarts have is interest income on their modest savings. Here is a summary of their income. 

Description  Amount
Base salary           $40,000
Bonus (estimate)      4,000
Retirement              2,200
Interest Income          400
Gross Income        $46,600
Tithe factor:                10%
Tithe:                    $4,660

Given the purpose of our charitable giving as outlined in section 222 of the Code of Canon law, it is reasonable (in normal circumstances) to allocate half of the tithe to your parish and half for other good works. I would encourage you to write a weekly check to your parish in order to be a good example to both your children and to other parishioners. In this case, the Stewarts would give the parish $45 per week. One reasonable way to give the remainder of your tithe is on a monthly basis. If the Stewarts had selected three charities in addition to their parish, each would receive $65 per month.

Now let's take an example that is more challenging: Jim and Jan Smith. Jim Smith is self-employed (he could be a plumber, realtor, or dentist among other things), and the finances have always been a struggle. As we visited, he shared how the business was cyclical in nature and his income fluctuated from month to month. That reminded me of one farmer who shared how he was completely dependent on rain for the irrigation of his crops. He described the impact that a four year drought had on his ability to budget and tithe. Now that's a variable income!

As Jim and I continued to visit, it became clear that in addition to the challenges posed by a variable income, another problem was that he was combining the finances of the business with his personal finances. When I asked whether he could properly analyze how the business was performing or whether his wife could understand their financial situation, he admitted that they couldn't get their hands around either the business or their family budget.

I gave Jim a couple of recommendations that helped smooth out the bumps in the road he had run into. I hope these same suggestions will help those of you who are self-employed. First, I would encourage you to maintain separate financial records for your business and your personal affairs. The financial needs of a business are substantially different than those of a family and trying to combine the work will be very confusing. You should have at least a one year operating plan for the business and an annual budget for the family. As you go through this process, I would encourage you to make a regular "salary" a planned part of your business plan. Obviously, it needs to be an amount the business will support, and you should be conservative in your estimate. You can base your family budget and your tithe on this base salary as follows: 

Description Amount
Business Revenues $150,000
Cost of Goods Sold  (50,000)
Gross Margins  100,000
Overheads except personal (50,000)
Personal Salary  40,000
Anticipated profit  10,000 

The Smiths would develop their family budget based on the "conservative" base salary of $40,000. If things went as planned, they would have an additional $10,000 at the end of the year that could be retained in the business as working capital or paid in the form of salary. I'm not dealing here with the issue of how taxes are calculated. Many small businesses are set up so that all of the income flows through to their personal taxes, whether paid in salary or not.

What I'm focusing on is an operational plan that allows you to better manage the finances for both your business and your family.

In this case, the Stewarts would calculate their tithe on the base salary of $40,000 so they would donate $2,000 to their parish at a rate of $39 per week and an equal amount to other worthy charitable causes. At the end of the year after they had the final results for the business, they would make one final adjustment. Assuming the $10,000 in profit had occurred, they would make an additional tithe of $1,000.

The time that Jim put into planning his finances has reaped big dividends. Now he has a better grasp as to how the business works and as he and his wife review the business plan and the family budget periodically, he has seen how her counsel has helped him make better decisions for both the business and the family. The planning has also allowed them to honor God and grow in virtue by tithing on a consistent basis.

Questions...

In response to our request for questions in the last issue, we received several excellent ones. Since they were too numerous to deal with here, I'll answer one of them in each of the upcoming issues.

Question
Should the amount we give be based on gross income or net income and why? It seems that since some of our taxes support the poor, it would be reasonable to include that portion as part of the tithe.

Answer
While the Code of Canon Law doesn't address this specific question, we do find two key principles in Sacred Scripture which should guide us. In addition, Thomas Aquinas deals specifically with this question in his writings.

The most important principle for us to follow in managing our finances is to recognize that all we have belongs to God (Dt. 10:14). When we acknowledge this, it is much easier to submit ourselves to the rest of His teaching. A second key concept mentioned repeatedly in the Old Testament is that of honoring the Lord with the first fruits of all our produce (Prov. 3:9-10). Most would practically apply the principle for the first fruits by saying our giving should be based on gross income rather than our after-tax income. Aquinas confirms that in question 87 of volume 21 in the Summa Theologica, when he says, "Tithes are due on the fruits of the earth, in so far as these fruits are the gift of God. Wherefore, tithes do not come under a tax, nor are they subject to workmen's wages. Hence it is not right to deduct one's taxes and the wages paid to workmen, before paying tithes: but tithes must be paid before anything else on one's entire product."

Given the comments of Aquinas, how are we to deal with the second half of the question regarding taxes? I admit that what I am saying here is my opinion, but since government has taken on a much greater role in assisting with the needs of the poor in our society, it seems it would be permissible to consider the portion of taxes that are used on behalf of the poor as part of your tithe. However, remember that many of your tax dollars go for things which benefit you such as roads, the defense of the country and other items. It would be inappropriate to reduce your tithe for the taxes that are applied to these items.

Just because it would be permissible to consider a portion of your taxes are part of your tithe doesn't mean it is always the most appropriate decision. I can't think of a better way to summarize how we should make the determination of whether we use gross income or net income in calculating our tithe than by sharing the words of my pastor. He reminds us that perfect charity is infinite. As mentioned in part I, tithing is about love and it helps us live out in a very practical way the two great commandments our Lord gave us: to love God with all our heart, soul, mind and strength, and to love our neighbor as ourself. Therefore, if you have the means to tithe based on gross income, I would encourage you to do so.