Should US churches be tax exempt? How much would the government earn if churches paid taxes? If churches paid taxes, would it be enough to pay for all the food stamps for every person on welfare?
Since the 1890’s, US churches have been tax exempt. They received an official federal income tax exemption in 1894 and they have been unofficially tax exempt since the country’s founding. Churches in all the 50 US states and also the District of Columbia have been exempt from paying property tax. Also donations to churches are tax deductible. Although there are strong debates whether or not these tax benefits should continue, the mainstream media does not adequately cover this particular topic. That is why many people do not really know much about it.
Ryan T. Cragun, Stephanie Yeager, and Desmond Vega, “Research Report: How Secular Humanists (and Everyone Else) Subsidize Religion in the United States,” Free Inquiry, June/July 2012 http://www.secularhumanism.org/fi/vol_32/4/cragun_32_4.pdf
Student Researcher: Christopher Suares, Indian River State College
Faculty Evaluator: Elliot D. Cohen, Ph.D., Indian River State College
Should churches be tax exempt? Those who say yes believe that tax exemption keeps the government out of church finances and therefore maintains the separation of church and state; as the Supreme Court stated, “The power to tax involves the power to control.” Advocates for the exemption also say that churches deserve this tax exemption because they provide essential social services– “the social benefit theory” of tax exemption. Churches, they claim, provide great benefits to society by their good works. Churches help the poor and the people in need; they provide many social services for the destitute and needy, and reach out to them in different ways. This results in things like reduced crime rates due to lives that have been changed and suicides that have been prevented.
On the other hand the opponents argue that giving churches special tax exemptions does not separate church from state but rather violates it and that tax exemptions are a privilege, not a right guaranteed by the US Constitution. They also say that in tough economic times the government cannot afford what amounts to a subsidy worth billions of dollars every year. Another argument is that it can be easily abused. For example, there are bogus churches that are set up for the sole purpose ofavoiding taxes. According to an IRS attorney “there was a brothel “church,” where sisterly love is offered to male worshippers in exchange for donations. In Hardenburgh, New York several years ago, 235 of the 239 property owners in that town were granted religious tax exemption because the properties of the owners were made branches of the mail-order “Universal Life Church.” In Wisconsin, hotels, pay parking lots, farms, and communion wafer bakeries are among the church holdings that are tax exempt. Overall, at least $4.2 billion in tax-exempt religious property now exists in that state alone. This is costing taxpayers even more money because they have to monitor and uncover these types of tricks.
Lastly, it costs average people a lot of money. Just think of it this way, for every tax dollar a religious organization does not pay, you and I are paying for it. And many of those religious organizations are amongst the wealthiest organizations in the world; for example by 1971, the total of real and personal property owned by U.S. churches was around $110 billion. In New York City alone, the amount was $3 billion in 1989. A 1986 study showed religious income in that year roughly $100 billion, or about five times the income of the five largest corporations in the U.S.
But how much exactly does the government lose? Ryan Cragun, an assistant professor of sociology at the University of Tampa, and two students examined U.S. tax laws to estimate the total cost of tax exemptions for religious institutions on property, donations, business enterprises, capital gains and “parsonage allowances,” which permit clergy to deduct housing costs. According to them, the US government gives up perhaps as much as $71 billion a year. States bypass an estimated $26.2 billion per year by not requiring religious institutions to pay property taxes. They also examined federal tax exemption laws, and some state and local laws, specifically in their home state of Florida. What they found was that capital gains tax exemptions for religious institutions may be as much as $41 million a year and U.S. ministry may claim as much as $1.2 billion in tax exemptions annually via the parsonage allowance.
Now to answer the “big question”: If churches paid taxes, would it be enough to pay for all the food stamps for every person on welfare? According to Cragum et al the estimated annual government subsidy of religion in the US per year is $71billion:
Federal income tax subsidy $35.3 billion
State income tax subsidy $6.1 billion
Property tax subsidy $26.2 billion
Investment tax subsidy $41 million
Parsonage subsidy $1.2 billion
Faith-Based Initiatives subsidy $2.2 billion
Total $71 billion
The Supplemental Nutrition Assistance Program, formerly the Food Stamp Program, has a diagram of all the monthly costs. By adding up these numbers we can conclude that it would cost about $76 billion to pay for all the food stamps for people on welfare. The diagram can be found here.
From the numbers above we can conclude that it is possible to pay almost all the food stamps of people on welfare if churches paid taxes. So at the end of the day everyone would benefit from Churches paying tax; they are a big part of the American society and they gain a lot of profits through many forms like donations, events, fund-raisers, trips and selling merchandise. Churches are NPO (non-profit organizations), which means that they should be taxed in the same ways as other organizations. Other NPO’s pay taxes on things like profits, franchise, business license tax, property tax and payroll taxes. Also churches use a lot of community resources such as land and real estate. They use even more than other single co-operations. If churches just paid tax on personal property, taxes for everyone wou