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Jun 19 2012

What Religious Tax Exemptions Cost Us

Free Inquiry magazine has an article (PDF) about tax exemptions for churches and other religious organizations and how much revenue it eliminates. The total figure: $71 billion a year. It’s a particular problem at the state and local level because they don’t pay property taxes:

In addition to paying no tax on donations, religious institutions pay no property taxes. The Hartford Seminary estimates that there are 335,000 congregations in the United States. Using forty-seven churches in Tampa from six different religions as our basis (Presby terians, Mormons, Baptists, Methodists, Episcopalians, and Pentecostals), we estimated that the average value of a church in the United States today is about $1.7 million (land and building). Because property taxes are paid at the state level, we averaged the total number of churches across all fifty states, multiplied the estimated number of churches by the average value, and then calculated the lost state revenues. States subsidize religions to the tune of about $26.2 billion per year by not requiring religious institutions to pay property taxes for property worth about $600 billion. This subsidy is of particular interest because property taxes pay for services such as firefighting and police, which religious institutions use the same as corporations and private citizens.

This creates a real revenue problem, especially in large cities where some of the prime real estate is taken up by churches that do not contribute to the revenue base that funds important services that they use as well. For instance:

Another way to illustrate the size of the subsidy may be to illustrate how much tax revenue would increase at the state level if religious institutions had to pay property taxes. In Florida, where the state government’s budget was $69.1 billion in 2011, the amount of tax revenue lost from subsidizing religious property was $2.2 billion or 3 percent of the state budget. The additional revenue would have mostly prevented the $1.1 billion cut to firefighter and police retirement plans and the $1.3 billion cut to public schools.

At a time when state and local governments are in revenue hell and are being forced to cut vital services like fire departments and schools, this is an important issue. In New York City, for example, it is estimated that the city loses more than $600 million a year because churches are tax exempt.

16 comments

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  1. 1
    regexp

    Its not just churches – its non-profits in general. Most pay little if any property taxes. In some cases (like in Boston) the city has asked non-profits to voluntarily pay taxes to make up for budget shortfalls.

  2. 2
    markholcombe

    I’ve never understood the legal reasoning behind tax exemptions for churches. Can someone explain it?

    Many do no engage in any “mission” or “community service” work and those that do it is a negligible function.

  3. 3
    Alverant

    regexp,
    Some non-profits actually do a service to the community so I’m willing to let it slide. However I think every tax exempt organizaiton needs to be checked to be sure they’re earning that exemption. Provided food, clothing, etc to the poor is OK. Providing “spiritual guidance” to the poor is NOT OK.

  4. 4
    D. C. Sessions

    Spending that money on schools would have been wasteful. Far, far better to support God’s chosen by providing them with houses, expensive cars, private jets, rentboys …

  5. 5
    reverendrodney

    I do not understand how “Congress shall make no law respecting an establishment of religion” translates into respecting religions to the point of giving them tax-exempt status!

    Pardon my ignorance of history, but how the hell did that happen?

  6. 6
    D. C. Sessions

    However I think every tax exempt organizaiton needs to be checked to be sure they’re earning that exemption.

    IMHO it should be a credit, not a deduction, and the size of the credit would be proportional to the amount the organization actually spent on human services. Doctors Without Borders? Near as doesn’t matter every dime would count (at, let’s say, 39.5%)

    Jet fuel for Reverend Billy Bob’s private jet to fly him to his place in Vail? Nada.

  7. 7
    Modusoperandi

    But every extra dollar they have to pay the State means one less dollar spent providing services to the public, like hiding pedophile priests, stoking ignorance and resentment on their radio programs, protecting marriage from people who want to get married, and preventing their own employees from getting contraception coverage (even when the programs those employees are involved in get State funding, the employee pays in, and the employees aren’t the same religion as them).

  8. 8
    timberwoof

    Whether “respecting an establishment of religion” carries the modern meaning or the older one suggested by a recent article here on FTB, giving churches carte-blanche tax-exempt status is just asking for trouble … and the call has been answered by rich televangelists and their crystal cathedrals.

    I think that churches should be treated the same as any other charitable organization: let them file for tax-exempt or non-profit status and present accounting yearly. Let the priests pay income taxes just like every other employee or contractor. Then we can see how much of a church’s money-laundering actually goes to charitable work, just as we can see for other socially- or environmetally-active organizations.

    And if they start acting like PACs, they should be regulated like PACs. Err, I mean, when they act like PACs…

  9. 9
    Michael Heath

    Exemptions on churches increases the tax rates on those without the votes or focused financial influence. It also places an undue burden on all non-church-goers whose taxes are increased. In Michigan the people paying disproportionately high property taxes are:
    1) Renters (think working poor)
    2) Landlords (unless the rental rates are sky-high which is usually not occurring in our state)
    3) Developers
    4) Property owners beyond their primary residence, including vacant land, commercial property, and vacation homes.

    Primary homeowners and churches disproportionately benefit. The former by being exempt from having to pay an 18 mil tax rate on which goes to the operation of schools. (Yes, vacation home owners pay for schools in the area of their vacation property where the primary residents are exempt; it’s that ludicrous.). Churches of course benefit from county services without paying a dime, their share is then spread across companies and people. So non-church-goers end-up paying a disproportionately higher rate than church-goers.

    While some populist liberals will cheer some of the above being inequitably taxed, the fact is unfairly taxing these people hurts other people as well. For example, high taxes suppresses vacation home purchases in areas which depend on tourism. In the state of Michigan these vacation spots are mostly the poorer counties with only several exceptions of our 80+ counties in the state. When the industrial-focused Oakland County catches an economic cold, ‘up North’ rural areas which depend on their residents’ tourism dollars catch pneumonia. E.g., our unemployment rates are sometimes three or four times higher than the low-employment counties like Washtenaw (sp?) County where the U. of MI is located.

  10. 10
    Abby Normal

    The say two wrongs don’t make a right. But if the wrongs consist of churches not paying property taxes and the Kelo ruling, then perhaps we’ve found the exception that proves the rule.

  11. 11
    bobaho

    The way I see it, churches and other religious institutions should be required to earn their exemption. Along the lines of the Elizabethan poor laws, churches should be required to care for the impotent poor and employ the sturdy poor. They would earn their exemption by demonstrating (proving) their compliance. I would also attach the rider that the pay and benefits of the priest/pastor/reverend not exceed the median pay of their sturdy poor employees. Failure to comply would result in revocation of tax exempt status. How much would the cities save on expenditures to support the indigent if these regulations were in place? Not sure, but I think it would be worth it.

  12. 12
    d cwilson

    At minimum the IRS needs to audit a few megachurches that are operating more like for-profit enterprises than anything that even resembles the public good.

  13. 13
    h1ff

    And can someone please tell me why the fuck the Christian right feels entitled to weigh in so heavily into the political arena when their (apparently booming) “business” of peddling lies contributes nothing to our country financially? Doesn’t it seem backwards that the group who won’t pay a dime into the system gets to influence public policy on the stuff that actually matters? The very same stuff the rest of us who actually stake a claim in this life give two shits about? It seems like the height of entitlement, all the tax money deprived in the name of mass delusion, all the tithing dollars that purchase jet airplanes for crooks and charlatans, its money OUT of the pocket of some actual deserving cause – pick any of them, even the most benign “real cause” is deserving of more support over non-existent fantasy causes. I can think of countless entities that deserve tax-exemption status before any fantasy factory. Hell, in a perfect world the “religious business” would have a vice tax placed upon it. After all, ignorance is a vice just like drug or alcohol addiction is. Especially willful ignorance.

    Would cancer be around today if every dollar went to medical research instead of tithing to some back-water church? Maybe in some form or another, but I can almost guarantee the reduction of cost and side-effects in treatment options. You know, real shit that actually matters since we’ll all have a brush with cancer at some point in our lives – either in ourselves or in someone we care about. How do Christians put their own individual death-comfort above the actual needs of people suffering? How very un-Christian. More levels of hypocrisy that I become a pariah when I point out. WTF?

    I love approaching religion in terms of its net cost to both the individual and society – intellectually, morally, financially, emotionally. The older I get, the more I realize the cost is beyond staggering. Not only can you measure it by the figures like the ones presented by the author, but other immeasurable effects, costs that don’t exactly have a clear-cut price tag. One more day gained with a loved one. Intellectual freedom. Self-actualization. The cost of my Christian neighbor’s comfort in the face of death is just too damn high. I simply refuse to pay in to it.

  14. 14
    heddle

    Such an easy solution..

    Remove all exemptions for all non-profits.

    Remove all deductions for all charities–I shouldn’t have to subsidize your charity of choice, and you shouldn’t have to subsidize mine.

    In fact, remove all deductions, including if not especially the mortgage interest deduction. If you live in an apartment, you should not have to subsidize my McMansion.

  15. 15
    democommie

    I think heddle’s on to something! His idea is sound, but we need revenues so maybe we should TAX the shit out of professional athletic teams and NASCAR!! ;.)

  16. 16
    bama

    i just read a article on this and the number was considerably
    larger then what this guy quoted. the number i got was
    300 to 500 BILLION dollars a year. that was ”just” the tax on property.
    it cost new york alone, 627 million a year.

    i can’t swear this is correct. it was in a news article i stumbled across.

  1. 17
    You Are Not Free « Jason Alan. Writer, Character.

    [...] no property is excluded from paying taxes. That means you, churches. If we have to pay, you have to [...]

  2. 18

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