Any practicing Catholic will tell you that Pope Leo XIV answers to a higher power, but none would say that higher power is the Internal Revenue Service. Yet, as Tax Notes’ Robert Goulder notes, the Holy Father will likely still need to file income taxes.
This debate highlights the importance of tax simplicity. If a government must levy taxes, the system should be straightforward enough for the average citizen to understand. If a government taxes income, it must be a simple flat rate. Even better would be to eliminate income taxes altogether.
As reported by The Washington Post back in May, the US requires all citizens (including those living abroad like Pope Leo XIV) to file an annual tax return. Most Americans residing overseas can exclude up to $130,000 in foreign-earned income from US income taxes. This doesn’t apply, however, to Pope Leo, because that income is earned working for a foreign government: the Vatican.
Although the pope does not have an official salary, the Vatican covers his housing, food, travel, and health care; it also provides a monthly stipend for personal expenses.
Figuring out what he must report will be the daunting task of his accountants. Fortunately, the Holy Father is not on the hook for Illinois personal income taxes because he has not earned income in the state since 2014 (the last year he resided there).
If he pays income taxes to a foreign government, however, it can be used to subtract his federal income tax bill by claiming the foreign tax credit. The pope likely utilized this credit during his time in Peru, where he became a naturalized citizen in 2015. Questions also arise about the specific tax forms he must file.
Declining a salary and giving the earnings to charity, however, does not mean Pope Leo escapes the IRS. Goulder explains, “For US tax purposes, a decision to decline salary may not be sufficient to prevent the earnings from being treated as gross income.”
The Holy Father is hardly alone in facing the headache of tax compliance. In 2024, 66 percent of Americans said that they believed the US Tax Code was “Overly Complex,” and for good reason. The Tax Code is 6,871 pages long. When adding on the federal tax regulations and official tax guidance, the total exceeds 75,000 pages. In 2024, Americans collectively spent 6.5 billion hours preparing and filing their taxes. This came at the cost of losing over $280 billion in foregone income and $133 billion in out-of-pocket costs.
Still, these complications are not likely to cause the Church to call for a crusade against the IRS. The Catholic Church acknowledges the legitimacy of civil authority while recognizing God as the ultimate authority. When questioned by the Pharisees about taxes, Jesus responded, “Then repay to Caesar what belongs to Caesar and to God what belongs to God” (appearing in Matthew 22:21, Mark 12:17, and Luke 20:25; also referenced in Romans 13:7).
That said, “Caesar” is not above criticism. The Tax Code needs to be simplified. In 2025, one in four Americans feared they would make a mistake filing their income taxes, which would likely result in an audit. These fears are valid. Research shows that low-income taxpayers claiming the Earned Income Tax Credit are disproportionately audited compared to the average taxpayer.
Enacting a flat income tax rate and eliminating loopholes would help ease those concerns. A flat tax rate is easier for taxpayers to understand and keeps government accountable. Carving out exceptions for specific cases (such as Pope Leo XIV’s) within the current framework is likely to invite fraud and manipulation.
Moreover, no income tax is better than a flat income tax rate. Taxing income (when money is earned) penalizes work, investment, savings, and hiring, which harms economic opportunity and overall quality of life.
Alternatively, taxing consumption (taxing when money is spent) is less distortionary. Doing so shifts when people spend without discouraging them from earning and investing.
In 2024, the federal government took 84 percent of all 2024 revenue directly from individual income taxes and payroll taxes (in other words, directly from the paychecks of hardworking Americans) — yet still ran a $1.83 trillion deficit. Calls for higher taxes belie the fact that the government’s budget problems stem from spending and overregulation, not a lack of revenue.
“Caesar” cannot manage and fund everything.
Simplifying the Tax Code will make life for Pope Leo and millions of Americans much easier going forward. The petty Caesars at the IRS should take note.
