Wednesday, March 30, 2011

Taxing Churches

Karen Spears Zacharias wrote a piece at Patheos called Time to Tax America's Churches. She looks at Ed Young, Jr. as the archetype of a new breed of CEOs, people who are leading vast and wealthy churches that function as corporations. She has some harsh words for these "celebrity" and "rock star" megachurch pastors, and she concludes her post with these statements:
We are facing hard economic times. A lot of much-needed revenue could be generated by taxing the Church.
If we are really interested in living out a life of faith, instead of just preaching about it, isn’t it about time the Church picked up its cross and carried it instead of pushing the tax burden off on everyone else?
I encourage you to read the article, but I have several responses.

1) Church employees are taxed like everyone else, with the exception of two benefits for ministers--a tax free housing allowance and the option to withdraw from social security. But if you claim the housing allowance, you better opt out of social security, otherwise that portion of your income will be considered self-employment, and you'll have to pay both sides of the social security and medicare taxes. Other than these benefits, church employees pay the same tax as everyone else.

2) There is no distinction, in the state of Ohio at least, between a church and any other nonprofit organization. If the government were to implement income taxation on churches, it must also tax every nonprofit organization, otherwise it would likely face a lawsuit of religious discrimination.

3) It may be flat out illegal to tax churches and nonprofits because the income they generate is not recompense for goods or services, but is rather given of the free will of the givers. In other words, despite Zacharias's depiction of megachurches as corporations, there is no commercial transaction taking place.

4) We live in a society where we constantly let one person ruin it for everyone. One person bends the rules and suddenly the masses have to bear the consequences. Freedom is impinged every time some idiot decides to do something stupid because we immediately run to the government to fix our problems and keep us safe. Let's not do that with churches and nonprofits. Their work, which cannot be duplicated by any government, would be crippled by taxation. Sure, Ed Young would get his comeuppance, but thousands of churches and nonprofits would be forced to close their doors.

5) Charitable giving pales in comparison to consumer spending. The benefit from taxing churches and nonprofits would likely not even cover the cost of government services required to fill in the gaps of those now defunct organizations. It would be the law of diminishing returns proven true on a grand scale of social deconstruction.

6) Finally, a commenter on Zachrias's post says it best when talking about the purpose of the church and the love of Christ:
Government can never embrace such love, will never live out such reality, can never love the enemy without regard to self, will never embrace the street person rather than the CEO, won’t ever hold up to be emulated the one who is most despised by society, and is not ever going to reject power for meekness, vengeance for grace, and violent action for forgiveness. Government, and indeed our American society itself, will always look at such claims as either nonsense, sheer naivety or both. And yet, Jesus does exactly these things, over and over, and calls us to do the same.

So, where I constantly struggle with my own collusion with and participation in denominational systems that too often look contrary to gospel relationship and being, I do believe that ultimately only the church has any possibility of congruence with life in Christ and, at its best, must be a counter to the state’s systems of power, privilege, and possession.
The Church and the Government--whether it's Rome, Nazi Germany, or the USA--are not after the same thing. The Church, at its best, is a woman with warm embrace, comforting those who mourn, feeding those who hunger, and seeking first the kingdom of God. The Government, at its best, is a bureaucratic system of cold and distant departments, assigning numbers instead of names, rubber-stamping applications, and seeking first the security of the State.

So, I say, don't tax the churches and nonprofits. Don't let a few abusers ruin a system that works. The Government has more than enough money. Maybe we should begin our audits with them, and then we can move out to the churches and nonprofits.


Christopher said...

Interesting topic Andy. Last fall I was at a conference for Ohio Non-profits where a speaker argued that many non-profits ought to be taxed. For instance, the Cleveland Clinic is a non-profit, despite the dollars it extracts from the local community (I don't intend that to sound harsh, just to indicate that money flows from people to the hospital). The CEO of the clinic is paid in the 7 figure range. While, as you point out, non-profits do pay employment taxes, they don't pay sales tax or property taxes. So the Cleveclinic's multi acre campus does not generate any tax revenue for local schools. The same can be said for the sprawling mega-church campuses.

There's no reason we could not pass a tiered tax system on non-profits, including churches so that we did not expose smaller, more vulnerable NPs to the same tax burden that larger, and essentially more profitable NPs are liable. Arguably, there is a threshold at which an organization no longer resembles the kind of organization the NP tax exemption was intended to benefit. In my opinion many churches and NPs fall into that category.

ELF said...

Taxing churches and other NP's (who survive from donations from the private citizens) sounds like double taxation if you ask me... We already pay: Income Taxes, Property Taxes, Sales Taxes, Fuel Tax… etc, and there are so many other "fee's" associated with our everyday life: Phone, Internet, Utilities, auto/license... I digress. I don't want to donate to my church for them to have to turn around and give more of my (God's) money to the government. This notion is completely insane if you ask me. American Government sometimes forgets what they were founded on "Religious Freedom" - Ring a bell??

Chris said...

I don't really see how taxing a church infringes on religious freedom. And plenty of mega-churches generate revenue in many more commercial ways than tithes. Obviously there is a meaningful distinction between NPs who are essentially small corporations and NPs that would cease to exist if their tax-exempt status were stripped.

andy said...


I think levying taxes on nonprofits (including churches) is ultimately a cynical move that overlooks the enrichment these entities bring to the community. And if we're going to tax one nonprofit, we have to tax them all, sliding scale or not. This means taxing schools, libraries, clinics, all government departments, and museums. I believe this creates an undo burden on entities whose primary contribution to the community is in areas other than commerce. Furthermore, I struggle with the idea that the government is entitled to collect monies from every entity that exists within its boundaries.

Chris said...

I can certainly understand some reluctance to place what might be an undue burden and your point that NPs often (hopefully always) benefit the community is a good one. However, I don't think it's a matter of government entitlement as it is a matter of pragmatism. Take the cleveland clinic again. You have a multi-million dollar entity that, while certainly contributing to the community, draws on it too. It receives, electric, water, fire, police coverage, all those things residents pay municipal taxes for, for free. Moreover, in not paying property taxes a significant contribution to the local schools is withheld. My point is that NPs of this sort, which in my estimation would include some churches, universities, schools, etc. can and should contribute in the form of taxes. I don't want to tax the tiny church of the brethren, or start up NP out of existence. But one could easily imagine a case where a NP that does more than, say half a million in revenue pays some of the taxes they are currently exempt from. As things stand now, we have large NPs operating essentially as for-profits (think of Ohio State U) but getting an enormous tax break b/c they get lumped together with the 3 person start-up soup kitchen. That seems silly to me.

ELF said...

Taxing Churches does infringe on religious freedom (directly and indirectly) it would affect every aspect of how the church runs/plans. Including the people it helps via donation and missions. Andy is right by the way; if you tax one you have to tax them all. I believe it would cause a lot of churches to close their doors if they were subject to taxation. Say they do start closing; would the government find a way to "bail them out"? Leading to more government involvement via "bail out funds" and inevitably tax credits and/or deductions. More importantly would our government care if churches closed?
It's a great picture you paint lumping OSU in with the 3 person soup kitchen (probably being run out of a “Mega Church”). Except for the fact that they both have their place in our society, and they are both needed. While OSU probably wouldn't claim feeding the homeless as their main contribution to society, they sure do a lot of work to cure illness, disease, and conditions. Keep in mind that the hundreds of workers at the Hospitals you mentioned do generate the taxes you propose. Income Tax, property tax, school tax, municipal tax… the list goes on. I'd also like to point out that you probably benefited personally or know someone who benefited by the research done at either OSU or Cleveland Clinic.
There is no Band-Aid for our country's deficit. I don't want to get off topic so I'll stop here as I don’t want to get further into the mismanagement of our tax dollars we currently pay.

Christopher said...

I still don't see how having a church pay property taxes infringes on religious freedom. I pay property taxes and so far as I can tell, this doesn't infringe on my freedom. Clearly, having to pay taxes would affect how a church budgets and the like, but would it really affect which bible it uses, sermons it preaches, etc? I'm inclined to think not.

I also really don't see why we would have to tax all NPs the same. We tax individuals differently, we tax corporations differently, surely we could come up with an overcomplicated tax code that taxed NPs according to their financial standing.

Finally, I don't mean to suggest that that the tiny NP soup kitchen should be lumped together with Ohio State...but that's exactly what our current tax code does. I was actually trying to make the opposite point that, as you say, taxing many small NPs would likely cause them to cease to exist, where as taxing large NP's (like Ohio State) might make fiscal sense for a community.

I honestly don't consider myself pro-tax, just think that the idea is worth considering. I completely agree that churches, hospitals, etc., add value to a community. However, especially in the case of the largest NPs like universities, they also represent a burden on the local infrastructure. An infrastructure they do not contribute to as an organization. Maybe the trade off in services is worth it, I can't say for sure, just think it's an idea worth considering.

andy said...


I see your point, but I just believe that the government should be limited in its taxation to only commercial enterprises.