Friday, November 16, 2012

Why Churches Should NOT be Taxed



 Over the last year, I have gained many liberal readers who have supported my über-progressive positions on many issues: the environment, bank bailouts, marriage equality, war, and the surveillance of citizens to name a few.  

But this post is sure to piss off many of my liberal readers.  Nonetheless, this blog is not meant to be a liberal rubber stamp, but to use reasoned analysis to bring together both progressives and libertarians who fear the power of an authoritarian state and corporatism - and that means crossing swords with friends every once in a while.

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Calls for the taxation of churches is not grounded in sound constitutional law, sound taxation procedure, or sound historical understanding: it is based solely on resentment against churches – specifically conservative churches – whose doctrines and members advocate for conservative causes.

1. The Constitutional Prohibition

The very first words in the First Amendment of the United States Constitution  read: 

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof...”

The admonition here has two parts:  The US Government shall not take any action that establishes an official religion (or which advantages one religion over all the others), and the US Government shall pass no law that prevents people from worshiping in their chosen church.

It is not up to the government to decide what is good worship or bad worship, recognized churches vs unrecognized churches, good doctrine or bad doctrine:  the government’s role is to stay out of religion.  In 1970, the U S Supreme Court – by a decisive vote of 8-1 ruled that the Federal Government could not tax churches, as that would constitute undue government interference in the exercise of religion.

This notion has long legal precedence.  A unanimous Supreme Court noted in 1819 in McCulloch vs Maryland that “the power to tax is the power to destroy.” Any federal income tax levied on churches – depending on how that tax rate was structured and how that tax law was written – would possess the capability of destroying or bankrupting churches.  Worse, depending on the application of the law to individual churches, it would necessarily favor one denomination over another as church organizational structures, expenses, and revenue sources (tithes, donations, yard sales, mass cards) differ from church to synagogue to mosque.  The government is not permitted to favor one group over another.  

2.  IRS Regulations Prohibiting Political Involvement by Non-Profits

Many who wish to tax religious institutions point to IRS regulations which specifically prohibit all 501c3 Non-Profits from political engagement. They argue then, that those churches that get involved in politics should lose their tax exempt status. There are several glaring problems with this approach.

First, the IRS is a Johnny-come-lately.  Yes, their regulations say this, but there regulations may in fact violate the Constitutional provisions mentioned above. Churches were treated as tax-exempt entities in law, under the US Constitution, for more than 175 years before the IRS created that regulation.  The Constitution trumps regulatory body rules.  

In any event, this regulation only came into effect in 1954, the same year that “under God” was added to the Pledge of Allegiance.  It is a curious phenomenon that those who oppose God in public life often point to the fact that the “God” phrase in the Pledge is a very recent innovation..but conveniently forget that the IRS regulation is just as recent.

No IRS regulation can eliminate a Constitutional right – including the Freedom of Speech.  Anyone and Everyone in this nation has the right to engage in political commentary, and, as the recent election proved, they do. The right to speech is as fully engrained in our Constitution as the freedom of Religion….and that means we let our raucous democracy loose with political discourse.  There is a good reason that the IRS almost never goes after churches for violating this regulation: they would probably lose at the Supreme Court.

Remember, the IRS provision against political engagement applies not only to churches, but to all non-profits.

It applies to AIDs service organizations that testify at public hearings, requesting increased funding for those without health insurance.

It applies to Veteran’s Organizations lobbying city councils for increased services to the homeless.

It applies to Teachers Unions meeting with their state legislators when education budgets are cut.


It applies to the Environmental organizations when they advocate against genetically-modified food, the keystone pipeline, relaxed standards for deep-water drilling, and Arctic drilling.

You really want to strip taxes of their tax-exempt status because of their political involvement?  Better look around at all the other non-profits that exist in the same regulatory boat, my friends.

3. Churches already pay taxes.

Yes, that’s right.  The only tax levied by the federal government is Income Tax (discussed more fully below).  Other taxes: State Income Taxes, Sales Taxes, and Property Taxes – are levied by state and local governments.

Employees of religious organizations – organists, secretaries,  maintenance, cantors…already pay personal federal income tax and social security taxes on their wages.

On a state and local basis, churches can be asked to pay property taxes.  In New Hampshire, where thousands of acres of land are owned by church-operated summer camps, those churches pay both property tax on the camps and business income tax on the profit experienced by the camp. In other places, towns and municipalities place ‘assessments’ or fees for municipal services such as fire protection, water use, and trash collection.

But for most people calling for taxation, it is the issue of federal Income Taxes they wish to see addressed.

4. Basic Accounting 101 Suggests Churches Would Pay Nothing Under an Income Tax.

Think about your personal Income Tax for a second.
You place your gross income on the top line, and then you begin taking off ‘deductions’ – you, your spouse, your children, and then the standard exemption or the Schedule A that permits mortgage interest, charitable donations, and health expenditures.  At the bottom of your form, you pay tax on what’s left: NOT on your gross income, but on what was left after permissible deductions.  It’s quite common for a family making $75,000 in wages to actually pay tax on only $35,000 after all the deductions are subtracted.

Corporate Income Tax works the same way.  We do not tax companies based on the raw number of dollar bills that land in their cash register; we tax them on their PROFIT (revenue less expenses).  That means that corporations subtract their expenditures on labor, raw material, equipment, utilities, advertising, etc., before any tax is applied…because THAT is how an Income Tax functions.
Some cavalierly believe that a tax on churches would be a tax on gross donations.

Think again: an income tax on churches would be applied to Profit, not gross donations. And regardless of how much a church receives in donations, you can bet that just about all of it goes out in expenses: clergy salaries, musical instruments, food, charitable work, utilities, payments to diocesan offices, roof repairs, etc…and that means, given the experience of the vast majority of American churches, your income tax rate would be applied against a profit of….zero.  Such an effort would be a pyrrhic victory indeed: tax church profits, only to find that from an accounting perspective, there are no profits to tax.

And forget the idea of taxing gross donations: that would be like taxing raw register receipts, and treating churches this unique way would be a display of government hostility towards religion that would never pass Constitutional muster, regardless of who was sitting on the Court.

5. Liberals, Be Careful What You Ask For.

Our collective memories tend to be very, very short.

Most agitation for taxing churches comes from liberals who resent the money and the ‘power’ of conservative churches like the Roman Catholic Church, the Mormon Church, and a plethora of Fundamentalist Bible Churches who rail against every liberal cause.

But a brief walk through history shows that every great liberal victory was won because liberal churches mobilized en masse.
 
Do we forget that the Civil Rights movement and marches were organized by the Dr. Rev. Martin Luther King, Pastor of Ebeneezer Baptist Church in Atlanta and President of the Southern Christian Leadership Conference?  Have we forgotten that the voter registration drives conducted in the south in the 1960’s were organized in black churches?

Imagine if conservative, white southern governments thought they could destroy the civil rights movement by increasing taxes on small rural black churches, and then mercilessly taking them when property or income taxes weren’t forthcoming.  “The Power to tax is the power to destroy.”
 Women’s rights to vote, immigrant rights, union rights, the Abolitionist movement…all were spearheaded by churches. The most recent civil rights battle of our time – Marriage Equality – has seen Episcopal Bishops like the Rev. Gene Robinson using his clerical office to testify before state legislatures and encourage the Episcopal faithful to advocate for gay rights. Congregational churches, Reform Jewish Congregations, Quakers, and Unitarian-Universalists have all organized peace rallies, marriage equality campaigns, and immigrant right  initiatives.

Conclusion

As I wrote earlier, most of my liberal friends don’t want to see Shelters for Homeless LGBT Youth, or Environmental Organizations, or Black Churches driving voters to the polls to be taxed or lose their tax-exempt status.  

Rather, they want to use the heavy hand of government taxation to ‘punish’ those conservative churches with which they disagree.

And that, more than anything, would do violence to our Constitution, which requires an even-handed government approach to all religious groups.

The answer is not to find a way around the Constitution; the answer is to allow the free flow of ideas in a democracy, and out-organize and out-vote those with whom you disagree.

And history has shown us that we can do that.

3 comments:

daemon said...

Hello,

Just found your blog here while on walkabout. Excellent reasoning, research and words here on this topic.

I came here thinking one thing on this issue without considering the far reaching ramifications, as you illustrated beautifully, and left with a completely different perspective on the entire issue of non-profit taxation. Thank you. :)

daemon

Phat Phlisopher said...
This comment has been removed by the author.
Phat Philosopher said...

Hello,

Some good points, but as one of your "liberal friends" I have reservations about church tax exempt status for reasons other than those you suggest.

I would be the first to admit that I find a great deal of the Christian hate and ignorance that is the mainstream today abhorrent. As a Christian I am often frustrated by my conservative brethren-as I am sure I frustrate them with my beliefs. That does not mean I feel they should be punished, financially or otherwise, for what they believe. They have every right espouse their beliefs and attempt to bring others to their point of view, as do I.

My concern about non-profit status for churches is two-fold:

1. Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves (Mathew 7:15). It is relatively easy for an ideologue/organization to assume the mantle of a religious organization to avoid paying taxes. Of course it is almost impossible to define who is and is not valid and I certainly would not be comfortable with government making that call. The easiest way to avoid this concern is to do away with tax-exempt status for all religious organizations.

2. I worry that our tax-exempt status is a tool government uses to keep churches from straying too far from the fold. I long for a pre-Constantine, pain in the ass movement of believers that is a thorn in the paw of power and not just another institution in the power structure itself. As long as the church has tax-exempt status it risks being co-opted for government/elite purposes. In my perfect world the church would refuse tax exempt status. I understand the financial implications (I have run a church) but at the same time I am a person of faith. If my path is righteous a way will be found. Once freed from the fetters of governmental control we can call for those things that matter to us without fear.