Churches in the United States have been able to receive tax exemption since the last nineteenth century; even before it was written into law, many of them experienced such privileges already anyway. During the American Revolution, nine of the original colonies were providing some form of tax relief to their churches. In 1777, tax exemption for churches was formally written into Virginia state law.
Should churches be exempt from paying taxes?
New York followed their example right before 1780 and the United States Congress made it a federal law to exempt churches from paying property taxes in 1894. All fifty states exempt religious organizations from paying property taxes and they are able to deduct any donations from their tax returns. Providing churches with tax exemption has many supporters. They feel that the exemption keeps religion and government separated and thus honors the United States Constitution. To tax churches, they say, would give the government power to regulate religious organizations. In addition, these organizations often provide a significant amount of public good and have positive effects on their communities.
However, there are opponents to such exemption as well. They feel that to exempt religious organizations from having to pay property taxes or report donations does, in fact, violate the Constitution. To exempt churches form paying taxes is showing favoritism and special treatment. It forces people to financially support religious institutions that they may not agree with or believe in and can be seen as an equivalent to the government giving the churches money in the amount they would have to pay in taxes. They also feel that the exemption just does not make financial sense. Though churches have been except from paying taxes for the majority of American history, the debate over whether or not this should continue have become popular as of late.
Churches should be tax exempt
A very popular reason for the support of keeping churches tax exempt is that it is protected by the First Amendment of the constitution. They feel that extending a tax-exempt status to places of worship is covered by the First Amendment’s Establishment Clause, which prohibits the government from establishing any national religion. In 1970, when a case that challenged this was brought to the Supreme Court, it was decided that the tax exemption provides less of a relationship between church and state than taxing them would, as it restricts their financial involvement and helps to reinforce the desired separation. Furthermore, supporters of church exemption feel that if the government were to require places of worship to pay taxes, it would violate the First Amendment’s Free Exercise Clause.
If any places of worship defaulted on their payments, the government would be able to shut them down. As stated by the Supreme Court itself in 1819, if the government is given the power to tax something, they have the power to “destroy” it as well. Those who believe taxing places of worship would be unconstitutional also feel that to tax them would be placing government above religion.
By being able to regulate churches in such a way, it would give the government power over religion, which is protected by the constitution. Opponents of tax exemption often state that the exemption is a subsidy to religion, making it unconstitutional. However, granting a religious organization exemption from paying taxes cannot be considered a sponsorship because the government does not handover any of its income to the churches. Rather, the exemption does not give churches the responsibility to financially support the government.
Supporters of tax exemption for religious organizations feel that the tax exemption is justified because churches contribute positively to the community. They offer services such as free meals and shelter for the homeless, food assistance and after-school programs to low-income families, etc. Many disadvantaged people rely on these programs and if churches were not afforded tax exempt status, they may not be able to fund these projects. Some of these duties would fall to the government without churches. With additional programs to support, there would need to be cuts somewhere and some of the programs would undoubtedly suffer. The money that the government supposedly loses by granting tax exemption is made up in the money they save by not having to do the work the churches do.
Another reason that many feel that churches should be exempt from paying taxes is that it would result in double taxation. If religious organizations had to pay taxes, one result may be that they need to start charging money for membership or events. Because individuals are taxed on their own anyway and do not receive any monetary gain from their places of worship, to tax them a second time for participation in these organizations would be double taxation. In addition, it could discourage people from donating more time and money to their churches, which would lead to a decrease in the positive influence the churches can have on their communities.
Churches should pay taxes
Many who feel that places of worship should have to pay taxes just like everyone else feel that, rather than upholding the First Amendment, it violates it. In Walz v. Tax Commission of the City of New York, Justice William O. Douglas defended his dissenting opinion of the verdict when he said,
“If believers are entitled to public financial support, so are nonbelievers. A believer and nonbeliever under the present law are treated differently because of the articles of their faith…”
For churches to be tax exempt because they are religious gives them special treatment, which is not in compliance with the First Amendment.
Even if the government were to grant the exemption because of the positive support made by places of worship to the public, there is nothing dictating this in the Constitution. Churches also receive different treatment from the government than other nonprofits do; while regular charities of a secular nature have to report income and file form 990 with the IRS, churches do not have to report their annual financial information at all. This kind of favoritism granted to places of worship is generally agreed to be unconstitutional. Also considered unconstitutional is the government subsidizing religion, but tax exemption is a form of subsidy. Tax deductibility and exemptions are a form of subsidy carried out by the government’s tax system. Those who oppose tax exemption for churches feel that a tax exemption is basically a cash grant in the amount the churches would have to pay in taxes if they were not exempt.
Opponents of tax-exemption, including Mark Twain, feel that tax exemption for religious organizations forced taxpayers to support religion. Twain said,
“No church property is taxed and so the infidel and the atheist and the man without religion are taxed to make up the deficit in the public income this caused.”
Churches benefit from the government collecting taxes but do not have to contribute to the money at all. In addition, there is nothing to distinguish a legitimate religion from fraudulent groups seeking to benefit from tax exemption.
One of the most controversial religious establishments is the Church of Scientology. In 1991, the press described Scientology to be a UFO-based cult aimed at achieving power and feeding greed; still, they have enjoyed their tax exempt status for almost a quarter century, saving the church an estimated millions of dollars in taxes. Despite the fact that most people agree that Scientology is more of a cult than a religion, they are still granted exemption from having to pay taxes.
Another reason that some feel that churches should not receive tax exemption is that to do so just does not make economic sense. Tax exemptions to secular nonprofit organizations would make more sense because such places, like hospitals and soup kitchens, do work and take care of the things that would fall to the government otherwise. While churches may take part in charitable works and projects, their main purpose lies in religious worship, which the government would not be able to do legally anyway. There is no fiscal benefit for the government to exempt churches and other places of worship from having to pay taxes.
Another reason that providing tax exempt status for churches does not make sense economically is that is costs the government billions of dollars in lost revenue. It is projected by the White House policy analysts that churches in the United States own up to five hundred billion dollars in property that cannot be legally taxed. The city of New York alone loses more than six million dollars in property tax revenue every year.
A number of churches in the United States make millions of dollars in revenue per year, sometimes more, and none of that money is taxed or regulated by the government at all. For example, one megachurch in Texas earns seventy five million dollars every year while the Church of Scientology makes well over half a billion dollars annually. They are able to collect all this money and not have to pay the government taxes on any of it, which does not make sense, economically.
This sample essay from the writers at Ultius explains even before tax exemption for churches and other places of worship was officially a law, these types or organizations have been receiving tax breaks for as long as established religion has been present in the United States. While the majority of states provided these breaks without any legal motivation or obligation, several states began establishing set rules for exempting all churches from normal tax responsibilities. The rest of the country followed suit and currently, all fifty states do not require churches to pay property taxes or report their donations and financial information. However, despite the fact that this exemptions has been going on for so long, it has faced opposition from the very beginning.
During the nineteenth century alone, Presidents Garfield, Grant, and Madison expressed disapproval for exempting places of worship from having to pay taxes. When this exemption was formally written into law, it was the first time that the United States government had named any group to be excused from paying taxes; rather, it was more common at the time to list organizations that could be taxed by the government. To this day, debate still continues over whether or not religious organizations should be taxed by the government.
Many feel that the exemptions are justified because the churches contribute positively to the community, they perform public good and support that would otherwise fall to the government, and they honor the constitution that dictates a separation of church and state. Still, though, there are many who feel that churches should be taxed just like any other organization. For the government to offer special treatment is unconstitutional, it forces citizens to support the exempt organizations, and does not make economic sense in the present American economy.
Frantz, Douglas. “Scientology’s Puzzling Journey From Tax Rebel to Tax Exempt”. The New York Times. The New York Times, 09 Mar. 1997. Web. 31 Jul. 2016.
McCulloch v. Maryland. 17 U.S. 315 (1819). Supreme Court of the United States. Web. 28 Jul. 2016
Schwietzer, Jeff. “The Church of America”. The Huffington Post. TheHuffingtonPost.com, 11 Oct. 2011. Web. 31 Jul. 2016.
Selfman, David. “New York City’s losing $13.5B in property-tax breaks”. New York Post. New York Post, 16 Jul. 2011. Web. 31 Jul. 2016.
Stanley, Erik. “Why don’t churches pay taxes?” Los Angeles Times. LA Times, 23 Sept. 2008. Web. 31 Jul. 2016.
“Should Churches (Defined as Churches, Temples, Mosques, Synagogues, etc.) Remain Tax-Exempt?”. ProCon.Org. ProCon.Org, n.d. Web. 31 Jul. 2016.
Walz v. Tax Commission of City of New York. 397 U.S. 664 (1970). Supreme Court of the United States. Web. 28 Jul. 2016.