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Taxpayers subsidize churches $82.5 billion! (Or do we?)

Taxpayers subsidize churches $82.5 billion! (Or do we?)

The Washington Post’s Wonkblog talks about a recent study that suggests that the American taxpayer subsidized religion to the tune of $82.5 billion per year. But is that a bad thing? The sponsors of the study say it is.

Ryan T. Cragun, a sociologist at the University of Tampa, and two of his students, Stephanie Yeager and Desmond Vega, took it upon themselves to figure it out. They’re not exactly disinterested parties; their research appeared in Free Inquiry, a publication of the Council for Secular Humanism. But Cragun is a serious sociologist of religion and the data seems to check out. The full scale of subsidies religions get is pretty staggering:

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When people donate to religious groups, it’s tax-deductible. Churches don’t pay property taxes on their land or buildings. When they buy stuff, they don’t pay sales taxes. When they sell stuff at a profit, they don’t pay capital gains tax. If they spend less than they take in, they don’t pay corporate income taxes. Priests, ministers, rabbis and the like get “parsonage exemptions” that let them deduct mortgage payments, rent and other living expenses when they’re doing their income taxes. They also are the only group allowed to opt out of Social Security taxes (and benefits).

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Dylan Matthews at Wonkblog says the study, if anything, underestimates the value of religious tax exemption:

The charitable deduction for all groups cost about $39 billion this year, according to the CBO, and given that 32 percent of those donations are to religious groups, getting rid of it just for them would raise about $12.5 billion. Add that in and you get a religious subsidy of about $83.5 billion.

Of course, these subsidies do more than reduce revenue. Property tax exemptions, in particular, distort real estate construction decisions and allocate more land to religious entities than would otherwise be the case, which drives up rents for everyone else (especially since religious groups tend not to buy property in high-density, skyscraper-style developments and instead get a whole lot of land for themselves)

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My response to the study is “so what?” Besides the fact that the study is commissioned and published by a group that is intrinsically opposed to religion, the study begs the question: why use tax policy to promote any kind of charity or not-for-profit enterprise whether or not it is religious?

This not a study of how much American’s give to their churches, this is how much religious organizations get in tax benefits. The study apparently does not differentiate between congregations and religious institutions that might get the same tax breaks even if they weren’t religious, such as hospitals, schools, and social service agencies. The study is biased, even if the figures appear solid, because it is trying to make the case that the religious institutions are greedy parasites that take all this saved tax money to the bank.

Where I live, we have not one but two tax-exempt hospital corporations that clear tens of millions of dollars in margins and pay no income taxes on those margins and pay no property taxes for their considerable land holdings…including large swaths of land for future growth…and so on.

The same is true with the majority of the colleges and universities in my area, almost all of which are private non-profit institutions..

And it is not the free-ride they make it out to be. In my city, all non-profits pay a perfectly legal extra fee on our sewer bill. The intent is to capture some of the indirect costs associated with the college campus in our town but all non-profits that own property and have a water meter, including churches, pay it. Also, we pay–as do all churches and synagogues in our state–business privilege taxes and property taxes on church lots that are not used for a direct charitable purpose. So our adjacent parking lot, because it is technically a different lot than our church, is taxed. Yes, it is less than our neighbors, but I contend that our situation is no less fair than the non-profit community playhouse who also do not pay property or sales taxes or the above named college, but like us, pay all the usual employment related taxes.

And some of these large tax-exempt institutions are at least least nominally religious. One of those hospital groups is named for a saint because it was founded by Episcopalians. The same with the colleges in our area (one with Episcopal roots, another with Presbyterian roots, one more openly Lutheran, one definitely Moravian and two overtly Catholic)…so maybe they are all lumped into the above study?

The real question is why should we offer tax exemptions to any non-profit or charity in the first place. We do this because it is a public policy expression that we, as a society, want to encourage investment in things we deem valuable. When we want investment in technology, we create a tax-subsidized industrial park where inventors can invent and sell widgets. We want a ball park, we subsidize the ball park, so theoretically people will come downtown and spend money and improve business. It doesn’t always work, but that’s what we do.

We give tax exemptions to non-profits, including religious groups, because it allows people to come together and do something the community values but that the government cannot or should not do directly. We also promote things that the government could do, but groups of private citizens can do just as well or better.

We value health care. So we support private citizens who create charitable institutions to build hospitals and (presumably) use the money they make to hire the people and buy the things to do health care. And because it is a public good, we don’t tax their property or their income…if they are using that property and income to continue that public good.

The government does health care, as well. But not all of it and frequently they do it for populations directly associated with the people the government hired such as veterans, or for people no one else will care for, or to do the research that no one else will capitalize.

We value education. So we allow universities, private schools, kindergartens to be run by groups of private citizens who use both the tuitions they collect, the funds they raise and invest, and the tax breaks we give them, to carry on the mission we value…education.

Yes. Government educates too. But we prize the value of education so much that we are willing to let groups of private citizens take the public project of education in many forms.

We value the arts. So while governments might build arts centers and performance halls, generally this world is dominated by groups of local citizens who raise money to support the arts. We don’t tax their property or their income because we consider their private efforts a public good.

In our country, we state as a fundamental principal that government should not run religion nor use religious tests to make decisions about public officials or policy. But we also recognize that people all have their own beliefs and act on them. The tax exemptions given to churches and synagogues are an expression that spirituality and the corporate expression of the same is an essential public good that is only done best by gatherings of private citizens.

The tax exemption is also a mark of the value that government won’t tell people what to believe or how to act religiously.

If suddenly tomorrow all churches were taxed for income and property, most congregations would close and along with them the local charity done by private citizens would go away with them. The soup kitchens, clothes closets, reading programs and music and artistic offerings that go along with congregations would go away too.

Tax coffers would not suddenly fill up. Towns and cities would have a bunch of empty buildings thrown on the the tax rolls.

Now the religious beliefs would continue. For Christians, the Body of Christ would not even be scratched but continue on it’s faithful way. It would just look and organize itself differently. Whether or not that would be a good or bad thing is another question. The bottom line in this discussion is whether society itself would be enriched if we decided to end the religious exemptions this study details so finely.

As long as all religious institutions, even secular humanist ones, are treated the same then using tax exemptions to allow private citizens to carry out an agreed public good…the enriching of society by promoting spirituality in all its forms…is sound public policy.

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Sabrina

Are all religious groups mandated to show how they serve the community?

If leaders in these church bldgs used collected funds to serve the communities, there shouldn't be so much poverty and homeless in these communities. They'll send a few hundred thousand dollars to a third world country but won't give to the homeless person they see right outside the doors of the bldg.

I work & have worked with homeless & hungry souls. It's a sad case of affairs. It's not a game. It's heart-wrenching. It's sad to see how close they are to a church bldg and most who are members of these congregations, but receive minimal help and services. It burns my spirit when I see how lavishly these supposedly mega-leaders live...Joel Osteen, Joyce Meyer, TD Jakes, Creflo Dollar, Kenneth Copeland, and many others.

How many of the members have they housed? How many have they taught how to care for a home? How many have they taught to cook for themselves, to shop, teaching them how to budget and following through to ensure their upkeep? Oh these leaders will toss a few coins at the bunch, but with those type funds there could be bldgs erected to care for the poor.

How about all the big named so-called prophets who profit off of the people's ignorance because they don't study the scriptures to know that they can hear from God with the only Mediator being Yahsuah.

Greed is an abomination in the sight of God. My heart is heavy from these false prophets and false healers...seems the hospitals should be empty of sick people if they truly prayed like our forefathers laid on hands with all faith in God. These falsies get paid for lying...tax deductible! Shame.

I will continue to pray that they ALL be ecposed and that God will send forth the true followers to fo His work. I look for opportunities to do more.

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Ann Fontaine

Please sign your full name when you comment. Editor.

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mscottsail

Weiwen, I appreciate your response. We need to be reflective whether our tax exemption constitutes freedom or favor, protection or promotion; and I don't think there's an easy answer.

That said, in the current political environment I don't see governments supporting the charitable goals supported by so many not-for-profits, including churches. I could support government support for the poor. I vote for the leaders who seem to advocate for that; and my wife says I never saw a tax I didn't like (not exactly true, but close). In the current tea-party-esque rhetoric at local and state levels, I don't see governments really interested in feeding the hungry, housing the homeless, or caring for the widow or orphan. We may not be doing all we could, or meet the monetization the article asserts; but I don't see much interest in government taking on those tasks, even if they did have the additional income from taxing our institutions.

Marshall Scott

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Weiwen Ng

I'm going to differ from consensus on this one. Are the services that the church provides worth approximately $70bn per year in foregone revenue? Revenue that could be used for other governmental purposes? I am not sure that the services we provide can be valued like that. Of course, I am also very skeptical of the nonprofit tax exemption in general - I believe that hospitals and universities should also be subject to property taxes and capital gains taxes.

When you are in a city, you use city services. You benefit from the roads, from the fire protection, from police protection and all the services that local government maintains and provides. And yet nonprofits don't pay for these services. We also don't support the local schools, and arguably we should support them regardless of whether we benefit from them, as they are a public good. We benefit from the services the state and Federal governments provide as well: a law system, transport, public safety, national defense and others.

There are some stellar nonprofits that provide services that government can't provide on its own. But the majority of nonprofits don't provide such services. A lot of them basically act like for-profit actors, or their benefits go to people who are already rich. Besides which, many nonprofits won't see much effect. I bet most nonprofits don't have endowments, which makes capital gains moot. Most of the really stellar nonprofits aren't going to show much of a profit, making corporate income tax mostly moot as well.

There is also the problem that the charitable deduction benefits the rich. much more than the middle class or the poor. You get to deduct donations from your income, meaning that you save your tax rate * the amount deducted. If your overall tax rate is 25%, you save 25%. If your overall tax rate is 50%, as it can be if you are wealthy and live in higher-tax jurisdictions like NYC, then you save more.

Bottom line, not to say that cities can't or shouldn't maintain a lower property tax rate for nonprofits, but I am not sure we deserve our exemption. It enables a lot of large nonprofits to basically act like for-profits with a tax advantage. And I am skeptical that some arrangement couldn't be found to ameliorate the immediate impacts.

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mscottsail

John, I also seem to remember a case from the '80's publically reported (I want to say Time, but I may be wrong) involving state laws. There was a county in upstate New York in which folks form the City were building second homes. Over time they came to outnumber local farmers, and property values - and taxes - were rising. So, a number of families had a member join and get ordained in the Universal Life Church (in those days before the internet, a mail-order sacrament), and their properties declared churches. Since the state of New York didn't want to wade into what was and wasn't a "real" religion (no more than the IRS), those folks effectively shifted the responsibility for higher taxes back to the non-resident property owners.

Marshall Scott

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John B. Chilton

Exactly, Paul. The tax code gets used to favor or penalize all sorts of things -- solar power, homeownership, education, having children, in addition the corporate loopholes you have in mind.

Besides free exercise, there's also the establishment clause. Giving religions tax breaks fosters religion, and creates the incentive create phony religions as a tax dodge. Is the IRS equipped to judge whether a religion is phony or not?

There's well known case where a one point the IRS decided Scientology wasn't a religion and was subject to tax -- they had good reason in fact to rule this way (and still do). The Scientologists started filing lawsuits everywhere and even hounding IRS agents personally. Eventually the IRS came to an agreement with them and Scientology now is treated like any other religion by the IRS.

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