Travis Weber is Vice President for Policy at Family Research Council. David Closson is a research fellow for religious freedom and biblical worldview at Family Research Council. This article appeared in The Western Journal on December 13, 2018.
Last year, the GOP in Congress passed and President Donald Trump signed into law the Tax and Jobs Act, one of their signature legislative accomplishments. The Jobs Act generally reduced the tax rates for businesses and individuals, and included a number of pro-family provisions. As a result, Americans paid less in taxes this year, workers received raises and bonuses, and the economy has roared.
However, a little-noticed provision in the legislation also created a new tax on nonprofits, which includes churches and other houses of worship — under which they will now be taxed for the cost of parking and providing transit benefits to employees. If not repealed, the results of this provision could be devastating for religious schools, charities, and churches — many of whom may be required to file state returns and possibly pay state income tax.
Now, the House stands poised to fix this tax problem with the Retirement, Savings, and Other Tax Relief Act of 2018 (H.R. 88). Without this bill, churches and non-profits will have to pay $1.7 billion over the next ten years, drastically reducing their ability to serve their communities. Not only will it fix this tax issue, but H.R. 88 will gut the Johnson Amendment, which has stifled and chilled the free speech rights of pastors and 501(c)(3) leaders to speak on “political” matters. Additionally, this bill will recognize unborn children for the first time ever in the tax code, allowing parents, grandparents, or other relatives to open 529 educational savings accounts for an unborn child.
The idea of tax exemptions for the myriad nonprofits working for the well-being of our society has received bipartisan support for decades, and rightfully so. In addition to its service to society, the church fulfills a role in helping people pursue questions of ultimate meaning. Indeed, the nature of the church dictates its ultimate allegiance — it is ultimately accountable to God. Thus, in a practical sense, its very nature suggests a rationale for its tax exemption. As Jesus said, “Give to Caesar what belongs to Caesar, and give to God what belongs to God.” Religious tax exemption is an implication of the state’s recognition that it does not control the church.
Rather, the state acknowledges that a greater authority than itself is present when it exempts churches from paying taxes. To burden it with additional taxes would threaten its ability to fulfill both its eternal and temporal functions.
As Chief Justice John Marshall famously observed in the Supreme Court case McCulloch v. Maryland, “the power to tax involves the power to destroy.” Of course, taxes have a role in society, but there is an underlying principle at stake when it comes to taxing churches. Because of the coercive nature of taxes, society should tread carefully before levying them against churches and other institutions that exist to serve the public good of society. Thus, the intrinsically coercive nature of taxation represents a sound rationale for maintaining tax exemption for nonprofits, and especially churches. It is the state’s responsibility to protect the church, but taxation, by its very nature, is a threat and assault to church sovereignty.
Although this may sound alarmist to some, consider the following statistics: there are currently 450,000 churches in America, and if these churches were taxed, they would cumulatively owe $35.3 billion in federal income tax, $6.1 billion in state income tax and $26.2 billion in property taxes. Further, if the parsonage exemption on ministers’ housing were removed, American clergy would owe $2.3 billion over the next five years. Worth noting is that the average American pastor with a congregation of 300 members earns less than $28,000 per year. Only 5 percent of all pastors earn more than $50,000.
In short, the power to tax contains the power to destroy. The elimination of the parking and transit benefits tax on churches and other nonprofits in H.R. 88 is a welcome development precisely for this reason — it will preserve such institutions’ freedom, which in turn will allow them to serve their neighbors and communities. Thankfully, H.R. 88 accomplishes this objective, along with other pro-freedom and pro-family goals, and should be passed. Ask your elected leader to support H.R. 88 here: https://frc.quorum.us/campaign/17048/