Religious Tax Exemption Good for Society, Church and State

David Closson is Director of Christian Ethics and Biblical Worldview at Family Research Council. This article originally appeared on on September 30, 2019.

Only two days after the Supreme Court legalized same-sex marriage, New York Times columnist Mark Oppenheimer called for the removal of tax-exempt status for churches that refuse to endorse court-created same-sex marriage. This confirmed the fears of many, including Justice Samuel Alito, who warned in his dissent that the Obergefell decision would be used "to vilify Americans who are unwilling to assent to the new orthodoxy."

Tax exemption for churches in America predates the nation's founding. But now liberals like Oppenheimer increasingly see Christian beliefs on marriage and human sexuality as outdated and subversive -- even hateful. They insist churches holding these beliefs do not deserve tax-exempt status.

But there are good reasons to preserve churches' tax-exempt status.

First, churches work toward the common good by contributing social and economic benefits to their communities.

For example, churches provide numerous community services including English classes, food pantries, pregnancy care, legal aid, disaster relief, youth sports leagues, employment workshops, and counseling services, just to name a few. Because of these programs and activities that benefit the common good -- not to mention the intangible spiritual benefits churches provide -- tax exemption is justified. Absent the church's social programs, the state would have to make an enormous investment in time and resources to make up the difference.

Churches also boost economic activity by bringing people together. A recent study of 90 congregations in Chicago, Philadelphia and Fort Worth revealed that the average urban church generates more than $1.7 million. Tax exemption is a commensurate and logical response by the state to the church for the latter's economic and social contributions to society.

As Chief Justice John Marshall explained in McCulloch v. Maryland (1819), the power to tax is the power to destroy, and if religious tax exemption is revoked, thousands of churches in the United States could be forced to disband. Smaller, rural churches would suffer dramatically, as would churches occupying valuable land in the hearts of America's great cities. Taxing churches would force many to close, which, in turn, would increase dependency on the state and deprive millions of social services.

Second, keeping churches tax-exempt preserves a constitutional understanding of the separation of church and state.

Chief Justice Warren Burger noted this in his opinion in Walz v. Tax Commission (1970) -- a decision that upheld religious tax exemptions -- where he explained, "It is unnecessary to justify the tax exemption on the social welfare services or 'good works' that some churches perform."

Implicit in Burger's contention is what he elsewhere states more explicitly, namely, that church and state are entities with distinct jurisdictions, and that it is therefore prudent for the state to "restrict the fiscal relationship between church and state" in a way that "reinforces the desired separation insulating each from the other."

In this 7-1 decision, the Supreme Court held that church tax exemptions do not violate the Constitution's Establishment Clause because exemptions neither advance nor inhibit religion. Whereas direct subsidies unduly entangle the state with religion, tax exemption provides "minimal and remote involvement between church and state."

In short, tax exemption is when the "government … abstains from demanding that the church support the state." Exempting churches from paying taxes is merely a withdrawal of the government's demand for financial support and recognizes that the church's spiritual task is beyond the state's competency to regulate.

The justices argued that "benevolent neutrality" toward churches was "deeply embedded in the fabric of our national life." Moreover, according to Justice William Brennan in his concurring opinion, exemptions to religious organizations are warranted because churches "uniquely contribute to the pluralism of American society by their religious activities." In other words, society is served by a diversity of institutions, and religious tax exemption is one means of limiting the influence of government on major areas of community life.

Thus, a religious tax exemption protects the church from the state and recognizes the unique and special role of religion. Because religion is where people find meaning and answers to life's most important questions, it is a basic human good that merits protection.

In conclusion, taxation really is a threat to church sovereignty. According to a proponent of taxing churches, if America's 450,000 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. Many churches already struggle to stay afloat financially; a tax burden would sink them. Therefore, from whatever angle it's considered -- historically, constitutionally or philosophically -- tax exemption for churches makes sense and should be preserved.