By Dom Nozzi
When a religion is good, I conceive it will support itself; and when it does not support itself, and God does not take care to support it so that its professors are obligated to call for help of the civil power, it’s a sign, I apprehend, of its being a bad one. — Benjamin Franklin
In 1993, I prepared an investigative report which found that Alachua County, Florida residents provided a $1.8 million property tax subsidy to county-wide religious organizations in 1993. A total of 516 religious properties in the county are tax exempt, and carry a total assessed value of approximately $65 million.
My report also analyzed the merits of exempting religious organizations from taxation. I concluded that such an exemption is not only detrimental to the welfare of county residents, but is clearly an unconstitutional endorsement and promotion of religion.
This report urges Alachua County to end its practice of religious property tax exemption.
The magnitude of the problem
Should religious organizations be taxed? The question has been debated since the founding of this nation.
James Madison was in support of taxing church property, as was James Garfield. In 1875, President Ulysses S. Grant’s message to Congress included a 900-foot petition containing 35,000 signatures stating, “We demand that churches and other ecclesiastical property shall be no longer exempt from taxation.”
“I would,” said Grant to Congress, “also call your attention to the importance of correcting an evil that, if permitted to continue, will probably lead to great trouble in our land….it is the accumulation of vast amounts of untaxed church property….In 1850, the church properties in the U.S. which paid no taxes, municipal or state, amounted to about $83 million. In 1860, the amount had doubled; in 1875, it is about $1 billion. By 1900, without check, it is safe to say this property will reach a sum exceeding $3 billion….so vast a sum, receiving all the protection and benefits of government without bearing its portion of the burdens and expenses of the same, will not be looked upon acquiescently by those who have to pay the taxes….I would suggest the taxation of all property equally, whether church or corporation.”
Unfortunately, Grant’s warning went unheeded by Congress. By 1971, the amount of real and personal property owned by U.S. churches had ballooned to approximately $110 billion.
In New York City alone, the amount was $750 million in 1969, $1 billion in 1982, and $3 billion in 1989.
In Wisconsin, hotels, pay parking lots, farms, and communion wafer bakeries are among the church holdings that are tax exempt. Overall, about $4.2 billion in tax-exempt religious property now exists in that state.
In 1993, there were 3,000 parcels in Clearwater, Florida worth about $1.2 billion are off the tax rolls because they are owned by religious organizations.
The case for taxing the property of religious organizations
The case for taxing religious property today is stronger than ever. The financial power of religious organizations has grown astronomically, despite rather modest growth in church membership (church attendance has hovered around 40 to 45 percent of the total U.S. population for the past several decades). In addition to the growth in the value of religious property, religious income has grown to the point where a 1986 estimate showed religious income in that year of approximately $100 billion, or about five times the income of the five largest corporations in the U.S. (the figure can only be a rough approximation due to the immense difficulty associated with determining unreported religious income).
In 1968, the assistant secretary of the U.S. Treasury stated that no reliable estimates are available to determine the extent of religious investments and business operations. He noted that most religious organizations were no longer dependent on charitable contributions and membership fees. With tax exemptions, they had developed funds that multiply through investment, and any investment they make usually bears no relation to the community’s evaluation of the churches’ supposed role in the community. The economic growth of religious organizations today, according to the secretary, “is limited only by the financial acumen and commercial skills of its managers.”
Religion, in other words, had become big business.
In light of such colossal financial strength, the head of the United Presbyterian Church in the U.S. has said that “with reasonably prudent management the churches ought to be able to control the whole economy of the nation within the predictable future.”
Yet objections are often raised when the proposal to tax religious organizations is proposed:
Objection 1: Don’t churches provide social services that would otherwise have to be provided by government?
This argument was given prominence in a 1970 U.S. Supreme Court case (Walz v. Tax Commission of the City of New York), where the Court ruled that religious tax exemptions are constitutional because churches relieve government of the burden of providing needed social services. But a Fordham law professor and Jesuit priest warned that this is a dangerous argument for churches seeking exemption to make, since “there are a lot of churches that provide no demonstrable benefit for society.”
Some have argued that only a small percentage of churches provide social services to the public. Of those that do, many provide the service only to members, or to non-members for a fee rather than free. When provided to non-members, the religious organization also tends to offer the service only if they are allowed to proselytize the recipient as well.
In addition, governments at all levels regularly provide significant funding for social service activities that are then simply administered by religious organizations. Often, the government also pays the administrative cost as well. Yet it is almost always the religious organization that takes credit for providing the government-subsidized service.
In other words, social services provided by religious organizations are generally nothing more than a device to retain members, gain members, and improve their public image.
It should also be kept in mind that unlike in past generations, all major social services are now provided to some extent by city, county, regional, state, and federal agencies. These services include welfare and relief programs; social security for the disabled and aged; hospitals for the mentally ill; schools for the blind and deaf; child care centers and foster homes; institutions for delinquents, alcoholics, the narcotic-addicted and the aged; unemployment compensation; worker’s compensation; special help for veterans with education and business loans; low-income housing assistance; disaster assistance; and assistance with general family problems.
Another important question is whether property tax subsidies to churches are an effective way to pay for social services. It is difficult or impossible to know whether private religious organizations perform better than other private or public organizations because there are few ways to check the efficiency or effectiveness of most religious programs. There is little or no external oversight or accountability — in part because religious groups are extremely reluctant to allow outside groups to make such investigations.
Objection 2: Wouldn’t religious taxation excessively “entangle” government with religion?
Supporters of religious tax exemption argue that the government would hinder the free exercise of religion by the steps the IRS would need to take to collect taxes from churches. Yet it is much more of an entanglement to require government to determine which groups are legitimately religious and which are not. To continue with the policy of religious tax exemptions, the government must either: (1) undertake the “Big Brother” task of investigating all groups to determine which are “sincerely” religious (are some to be deemed “insincere” merely because they do not adhere to “proper,” conventional, Christian morals—such as animal sacrificers and peyote eaters?); or (2) allow widespread fraud by groups and individuals posing as religions merely to achieve tax exemption (the latter government option has been largely the case so far, even though it is clearly unacceptable for so much fraud to waste so much tax revenue).
There is currently a proliferation of phony churches as a tax dodge. For example, an IRS attorney cites a brothel “church,” where sisterly love is offered to male parishioners 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 a mail-order “Universal Life Church.” (Research for this article turned up a few questionably-named religious properties in Alachua County that may warrant investigation.) To stop these abuses, should the federal government interrogate “suspect” churches and church members to determine if they are truly religious? Is this the role government should play in a free society? Would it not be an unconstitutional infringement on religious liberty?
Yet it is either massive fraud or Big Brother investigations of religious sincerity that we must choose from in order to continue allowing religious tax exemptions.
Obviously, assuming massive fraud is unacceptable, entanglement is much less extreme if government simply taxes churches the same way it taxes all other organizations.
Objection 3: Isn’t the power to tax the power to destroy?
The First Amendment protects religious freedom, freedom of association, and freedom of the press, among other things.
Clearly, a tax levied against only religious organizations would not protect religious freedom. But if churches were merely subject to the same taxes as all other groups (such as newspapers or political philosophy clubs), it is obvious that there is no infringement. In fact, in a 1936 U.S. Supreme Court case (Grosjean v. American Press Co.), the Court stated that newspapers are not immune from any of the ordinary forms of taxation, despite the First Amendment requirement that freedom of the press not be infringed upon.
Objection 4: Is there anyone other than militant critics of religion calling for an end to the exemption?
Yes. In addition to James Madison, Benjamin Franklin, James Garfield, and Ulysses S. Grant, Elizabeth Cady Stanton once had this to say at a women’s suffrage campaign:
“If all those magnificent cathedrals with their valuable lands in Boston, Philadelphia and New York were taxed as they should be, the taxes of women who hold property would be proportionately lightened….I cannot see any good reason why wealthy churches and a certain amount of property of the clergy should be exempt from taxation, while every poor widow in the land, struggling to feed, clothe, and educate a family of children, must be taxed on the narrow lot and humble home.”
Similarly, Bishop Fulton Sheen, who apparently had his conscience twinged by the enormous wealth of churches, stated, “There never should be a new church built here [in Rochester, New York] that costs more than, say, $1 million. If a diocese insists on spending more for a church, it ought to pay something like a 20 percent tax for mission. The right of the poor to have a decent house enjoys priority over our right to erect a tax-exempt structure which exceeds the minimum.”
Other churches have concluded that it would be best that religious organizations pay their fair share of taxes. They include the American Lutheran Church, the United Methodist Church, and the New Jersey United Presbyterian Church.
More recently, in Clearwater, Florida, a Unitarian-Universalist minister urged his parishioners to pay a “conscience tax” equivalent to the money they are saving due to the Unitarian church tax exemption. He noted that these are difficult economic times, and churches should not be shirking their civic responsibilities.
Objection 5: Isn’t it better to make land tax-exempt for a church than for, say, public open space?
The point has often been made in Alachua County that government should not continue to buy parks and open space because it takes land off the tax rolls. Yet such land is so desirable as a neighbor that the resulting increase in the property value of adjacent properties is almost always able to pay for the parkland in short order (the increased property value increases the amount of tax revenue collected by government, which can be used to recoup the money spent to buy the parkland).
In addition, parks and open space help our local economy by drawing in tourism dollars (tourists are attracted to areas well-endowed with parks and open space) and businesses seeking to relocate in areas with a high quality of life (typically exemplified by areas well-endowed with parks and open space). Often, such lands also protect sensitive natural areas from development, or prevent costly urban sprawl.
Finally, public parkland is clearly beneficial to all of society, since all citizens are freely able to enjoy its benefits if they so choose.
In contrast, church property these days is typically detrimental to the value of nearby properties (thereby lowering tax revenues not only from the tax-exempt church land but also from adjacent lands experiencing lowered property values). Citizens near churches regularly complain about traffic and parking problems at a church, or protest a proposal to put in a noisy church day care center.
The reduction in collected tax revenues indirectly reduces tourism and quality-of-life inducements for new businesses, because local government has less revenue to spend for such quality-of-life enhancements.
Finally, each church is clearly exclusive of those who do not adhere to its beliefs, thereby providing benefits for only a tiny segment of the community.
Objection 6: Doesn’t all of society benefit by providing assistance to an institution that does so much good in the world?
The Walz case justified tax-exemption for churches in part by claiming that religious activity is beneficial to society and is therefore to be encouraged. However, by requiring that no law respect an establishment of religion, the First Amendment does not allow government to make such a determination. Many thoughtful and upstanding citizens take great issue with the claim that religion is beneficial. (In fact, Baptists will claim that much of what Lutherans do is harmful, and visa versa.)
There are hundreds of different interpretations of morality within the hundreds of different religious sects in the U.S. Shall we engage in shouting matches about how beneficial a particular religious activity has been? Even if they all agreed on the question of morality, would it not be tyranny to have the public subsidize only the religious view of morality? What of the secular organizations, philosophers, and philanthropists who promote morality?
Other questions come to mind: Should the taxes of non-churchgoers and non-religious citizens be higher so that churches are better able to lobby government to pass laws in line with the religious beliefs of the church? Or to give churches a greater ability to recruit members, or build a more magnificent church which excludes non-church members because their views differ from those of the church? Or to help churches preach doctrines or political positions which non-church members strongly disagree with? Or to publicly fund church-owned hospitals that refuse to provide abortions, or Christian colleges that openly practice discrimination? Or to provide churches with police, fire, and utility services free of charge?
The Establishment clause in the First Amendment is designed especially to avoid such unfair coercion. It recognizes that religion is a matter of private opinion and should therefore be funded by private support. For the government to grant tax exemptions to religious organizations is to grant public support to one set of private opinions while unfairly burdening those who hold contrary private opinions.
Indeed, the dissent by Justice Douglas in the Walz case stated that the tax exemption for churches means that “Through the mechanism of the state, all of the people are being required to finance a religious exercise that only some of the people want and that violates the sensibilities of others….One of the best ways to ‘establish’ one or more religions is to subsidize them, which a tax exemption does.”
Despite these questions of constitutionality and fairness, IRS rules allow church tax exemption even when the church engages in no charitable work whatsoever. It is clearly preferable that the IRS provide tax breaks to churches in the same way such breaks are provided to other charitable groups—namely, by qualifying for prorated exemptions for documented charitable work.
Objection 7: Isn’t it O.K. for the government to aid religious groups as long as all religions are aided?
The U.S. Supreme Court, in Everson v. Board of Education, declared that “neither a state nor the federal government….can pass laws which aid one religion, aid all religions, or prefer one religion over another.” Yet all levels of government have done exactly that by granting significant preferential tax treatment to religious groups, solely because they are religious, which is clearly inconsistent with the First Amendment, and fairness in general.
Objection 8: Didn’t the Walz case decide once and for all that taxing church property is unconstitutional?
In the Walz decision cited above, Justice Burger argued that the tax exemption for churches represented “benevolent neutrality.” Many have since questioned whether it is possible for neutrality to be benevolent. But while the decision was favorable for exemption supporters, opponents of exemption point out that, according to the decision, while the government may constitutionally grant church exemptions, it did not say that the government must grant the exemption.
In fact, by leaving this door open, a future challenge to the exemption can not only point out the inherent contradiction in the “benevolent neutrality” phrase and the questionable “social benefit provided by churches” argument, but can also apply the logic used in the more recent Regan v. Taxation without Representation case. There, Justice Rehnquist admitted that “tax exemption and tax deductibility are a form of subsidy….This Court has never held that the Court must grant a benefit….to a person who wishes to exercise a constitutional right….we again reject the “notion that First Amendment rights are somehow not fully realized unless they are subsidized by the state.” Rehnquist was stating this with regard to a subsidy for a political organization. The same logic can be used to end tax exemption for churches.
A 1993 Summary of Tax-exempt religious property in Alachua County
I investigated the extent of religious property tax exemptions in Alachua County. The following is a summary of my findings:
|Number of properties with religious tax exemption.(Approximately one-third of these properties are owned by a Baptist church. Other than the Baptists, only the Methodists, at 14 percent, owned more than 10 percent of the total religious properties.)
|Assessed value of religious land
|Assessed value of improvements to religious land
|Total assessed value (land and improvements)
|Total tax revenue forgone by not taxing religious land
Most Expensive Church Property in Alachua County (1993)
||Total Assessed Value
||4039 Newberry Road
|Trinity United Methodist
||3536 N.W. 8th Avenue
|Holy Faith Catholic
||700 N.W. 39th Road
||425 W. University Avenue
||1801 N.W. 5th Avenue
||1826 W. University Avenue
|University United Methodist
||1320 W. University Avenue
|Univ. Ave Church of Christ
||4626 N.W. 8th Avenue
|14th St. Church of Christ
||2720 S.W. 2nd Avenue
||300 S.W. 2nd Avenue
|Congregation B’Nai Israel
||3830 N.W. 16th Avenue
|First Baptist of High Springs
||905 N.W. Santa Fe Blvd
|St. Augustine Catholic
||1738 W. University Ave
As the first table shows, county residents provided a $1.8 million property tax subsidy to religious organizations in 1993. Had the property of religious organizations been taxed that year, there would have had an additional $1.8 million to spend on fire and law enforcement services, education, transportation, social services, parks and open space, criminal justice, environmental protection, and the many other services provided by local government agencies. Alternatively, county taxpayers could have had their taxes reduced by $1.8 million — had religious organizations paid their fair share of property taxes.
At a time in which Alachua County and Gainesville governments (as well as nearly all other governments throughout the nation) are straining to provide desired levels of police, fire, transportation, recreation, education, social, and environmental services, the fact that enormously wealthy and powerful churches are tax-exempt is scandalous.
Who would be hurt by a tax on churches? The clergy and others who make money from churches would find their livelihood less profitable. So too would religious church members who are not confident their religion can attract members and survive unless non-members are coerced into financially supporting their church.
Who would gain from church taxation? Clearly, businesses in and Alachua County would benefit, as would other taxpayers in the county, all of whom would enjoy significantly lower taxes.
Local governments would benefit, and would be able to provide more services to the public.
Church members would also benefit. While church members might have to put more money into the collection plate to maintain their church (to make up for the taxes the church would have to pay), they would have more disposable income to give, since the tax on their homes and businesses would be lower.
In the name of fairness and general social welfare, it is time to end the unconstitutional government welfare program for churches.
American Atheist. (1987). “Taxing the Church: Is It Legal?” American Atheist Magazine. May 1987.
Buckner, Ed. (1994). “Who Gains or Loses If Churches are Taxed?” The Henry Herald (Georgia). July 27, 1994.
Dart, John. (1977). “Church Taxes: Pros and Cons.” Los Angeles Times. November 6, 1977.
Delibert, Steven. (1979). “Should Churches Be Taxed? Yes — Tax Exemption Unconstitutionally Establishes Religion.” UPDATE on Law-Related Education. American Bar Association Special Committee for Youth Education for Citizenship. Winter 1979.
Freethought Today. (1993). “Churches’ $4.2 Billion Exempt in Wisconsin.” Freethought Today. November 1993.
McCabe, Joseph. (1930). Why I Believe in Fair Taxation of Church Property. Little Blue Book No. 1502. E. Haldeman-Julius.
O’Hair, Madalyn Murray. (1974). Freedom Under Siege. Tarcher.
Rangell, Meyer. (1990). “The Big Religious Give-Away.” Freethought Today. December 1990.
Willey, Susan & Wayne Garcia. (1994). “Taxing Question: Who Pays What?” Clearwater (Fla.) Times. January 25, 1994.
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