Scientist, former White House senior policy analyst, author
As public resources grow ever scarcer in a declining economy, the time has come to reevaluate the established and often unquestioned relationship between church, state and property taxes. That the subject is considered taboo only serves to illustrate the urgent need to penetrate unexamined assumptions based on a faulty reading of history.
We often accept much about our traditions without any thought to origin. Many Americans assume, for example, that the clause "under God" in the Pledge of Allegiance was included in Francis Bellamy's original lyrics of 1892. Not so. Those words were inserted in 1954 when President Eisenhower signed legislation to recognize "the dedication of our Nation and our people to the Almighty." The new law grew from a successful Knights of Columbus campaign to transform the Pledge from a patriotic oath to a public prayer, making clear the distinction between America and our godless Communist enemies. This appeal to god and country was not without controversy, and even today about 38% of Americans believe the wording violates the principle of separating church and state.
As with the wording of the Pledge, tax exemption for church property has a complex history with an origin just as badly misunderstood. While the vast majority of Americans believe otherwise, the Supreme Court ruled in 1970 that exempting church property was permissible, but not required by the constitution (Walz v. Tax Commission of the City of New York). We have no obligation to exempt churches from property tax.
What has been obscured by time is the nature of the Supreme Court's decision in Walz, a close vote of 5-4. The minority wrote an opinion supporting the argument that state exemption for church property indirectly caused the state to make a contribution to religious bodies, in violation of the First Amendment. Exempting churches from property tax was one vote away from being declared unconstitutional.
The Tenth Circuit Court further clarified the Walz ruling in 1972 (Christian Echoes National Ministry, Inc. v. U.S.), holding that "tax exemption is a privilege, a matter of grace rather than a right." The Supreme Court went even further in that direction in 1983 (Regan v. Taxation with Representation), ruling 8-3 that tax exemption was indeed equivalent to a tax subsidy. Justice Rehnquist wrote:
"Both tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income."
That is not the ravings of a left-wing nut job, but the words of a Chief Justice of the Supreme Court who sat well right of center. Even conservative courts have ruled consistently that churches have no special privilege in property tax exemptions.
James Madison, Benjamin Franklin, James Garfield and Ulysses Grant all opposed the exemption. Grant said to Congress, ""I would 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."
Extending that privilege can no longer be justified.
Two compelling arguments dictate that such exemptions should be abandoned. First, fiscal sanity suggests that states can no longer afford the luxury of foregoing the revenue lost through exemptions at the expense of all other taxpayers. Second, religious institutions that engage in blatant political activism violate IRS statutes that prohibit political campaigning by any tax-exempt religious group. Let's look at each of these arguments in turn.
Fiscal Sanity
The estimated value of untaxed church properties in the United States is on the order of $300 billion to $500 billion (a wide range because no central database collates these numbers from counties across the country). Undeniably, residents pay higher taxes than they would if religious institutions paid their share on this vast sum. Churches use city services, rely on good streets, are protected by the police, and would expect the fire department to respond to a blaze on church property. Yet churches do not contribute to the city accounts from which funds are drawn to pay for those services. Everyone else has to pay more to make up the difference. Across the nation tax authorities report that exemptions for property and buildings used for religious purposes contribute significantly to and are often the biggest cause of lost revenue.
Every time a new church is built on land that could generate property tax, all other tax payers are placed immediately at a disadvantage by becoming the source for that lost revenue. That must stop. Churches should be taxed like the big businesses they have become. The U.S. Treasury reported way back in 1968 that established religious organizations no longer depend primarily on charitable contributions and members fees, but rather on the return from multiple investments. In 1986, the last year for which I can find accurate numbers, religious organizations earned an annual investment income of $100 billion. That number is probably five to ten times greater today.
The argument for exemption on the basis that churches are non-profit and provide charitable services to local communities holds no water. Other organizations with identical characteristics do not benefit from the exemption. The exemption is clearly focused on religion. This brings us to the second argument.
Pulpit Politics
Churches are big businesses, but also big political machines. The pulpit has become a central point for political rallies. Churches have thrown off the pretense of being non-political. Examples of political activism are abundant.
In 2004, the Catholic Church interjected itself directly into presidential politics. Referring to candidate John Kerry, the church declared that any person who is "personally opposed to abortion, but supports a woman's right to choose" incurs automatic excommunication. The Boston Archbishop Sean O'Malley said that pro-choice Catholics are in a state of grave sin, and cannot take communion. If any doubt lingered that the target of these pronouncements was Kerry himself, St. Louis Archbishop Raymond Burke went so far as to forbid Kerry from taking communion when the candidate was campaigning in the area.
If that example is too subtle, O'Malley's predecessor, Cardinal Humberto Medeiros urged Catholics not to vote for Barney Frank and James Shannon, two liberal Democrats in Congress.
In a debate during the 2006 gubernatorial election, Sarah Palin stated that religious leaders should be able to support a particular candidate from the pulpit. That is not terribly surprising coming from her. Her religious mentor, Pastor Kalnins, told followers they would go to hell if they supported Senator Kerry during the 2004 presidential election.
This year, in a repeat of 2004, a South Carolina Catholic priest, the Rev. Jay Scott, threatened his parishioners that a vote for Obama would deny them communion. The priest said that any support for Obama "constitutes material cooperation with intrinsic evil." Rick Warren, pastor of the Saddleback Megachurch in California, said he "hopes to redefine presidential politics." The Mormon Church actively lobbied for and funded Proposition 8 in California.
We no longer even bother pretending otherwise: churches are political organizations that routinely violate IRS statutes, undermining any claim they might have had to property tax exemptions.
States can no longer subsidize churches and other religious organizations on the backs of ordinary taxpayers. Churches have evolved into nothing more than big businesses that strive to influence politics with direct pleas from the pulpit and massive contributions to political campaigns. Let us listen to James Madison, one of the most influential of our Founding Fathers and a great president. As he pleaded, let us impose property taxes on all religious institutions, and let us do so now.
