The Reformed Advisor

So You Want to Tax Churches? Have You Considered…

Posted on April 22, 2014 in Public Policy, Religious Freedom by

churches tax exempt

This is the sentiment some have recently adopted. But is it the best idea?

See if you can answer this question: why are churches tax exempt?

That is a hot button topic in the news, around lawmakers, and on the blogosphere these days. Many don’t know why churches are tax exempt and others simply don’t think they should be. They say that churches are corporations earning money like everyone else and should pay taxes. But is paying taxes really the primary goal of those advocating for the taxing of churches? First, let’s talk about why churches are tax exempt.

Alliance Defending Freedom senior legal counsel Erik Stanley explains that churches have always been tax-exempt since the IRS tax code was first established. And in every version of the code ever since, churches are tax exempt. But, as Stanley explains, many simply don’t know why.

“The fact that most Americans cannot explain why their church is tax exempt indicates a forgotten history and is emblematic of a society that has systematically devalued the church as a beneficial societal institution.”

Therein lies the major problem. Churches were once viewed as valuable organizations that benefited society. But the effort to demonize and marginalize Christians, faith, and churches has successfully changed the opinion of many so that churches are no longer viewed as valuable. All the good churches do for their communities is often forgotten and ignored in the wake of the churches historical beliefs regarding life, marriage, and sexuality.

Since many now view churches as holding to “discriminatory” views on these issues they believe they no longer deserve to be tax exempt. Such a notion seems far-fetched and Erik Stanley shares two sound reason why churches historically have been tax-exempt and why they should remain as such:

“First, there is the ‘social benefit’ theory of tax exemption. This recognizes the fact that churches provide great benefits to society by their good works. Churches minister to the poor and needy in the community…The social benefit theory justifies tax exemption for churches as a kind of bargain – churches provide needed services, so they are entitled to tax exemption.

“One corollary of the ‘social benefit’ theory that is often overlooked is what I have termed the ‘intangible benefit’ theory of tax exemption. This highlights the intangible and often unseen benefits provided by churches to the community. Things like reduced crime rates resulting from transformed lives, suicides prevented when people surrender to Christ, and people with destructive behavioral patterns that harm the community changing into hard-working and virtuous citizens who contribute to the well-being of the community. It is difficult to put a price tag on these types of intangible benefits provided by churches, but there is no question that they exist.”

These two facts should be enough to convince naysayers that churches deserve to be tax exempt and should remain so. But let me give a practical example just for clarification.

My church seeks to be active in the community in a number of ways. My pastor delivers meals to elderly shut-ins that can’t get out much anymore. He also spends a great deal of time visiting people in the hospital, counseling families in times of hardship and grief, and offering rides to folks that can’t drive to doctor’s visits. My pastor also performs many funeral services each year without asking for a dime. Our church offers a meal each Wednesday night for just $3 a person, which is just enough to cover the cost of food. It’s a meal most would pay $10-$15 in a restaurant for, but we offer this as a service, not to make money. As pastors we perform services like pre-marital counseling either for free or at rates lower than any counselor in town. We perform wedding services without asking for money as just one of many valuable services to our community.

In the next couple of years a lot will happen at my church. We will seek to serve our community by offering classes in financial management and debt reduction, addiction recovery, and perhaps, marriage and more. We will seek to serve our schools through volunteering and even go overseas to help developing countries. And we will do it without making one penny.

Now, suppose our tax exempt status was removed. What would the impact be?

For our little church of 120 or so, the economic impact of losing our tax-exempt status would be devastating. The tax rate would decimate our budget to the place that we would barely be able to keep the doors open and the lights on. No more meals on Wednesdays – which would hurt many elderly folks that depend on those meals. The shut-ins wouldn’t get food either. Our pastor would not have the ability to perform free funeral services and he would most likely have to get a part time job; which would hinder him from counseling and visiting folks in the hospital.

As a church we would not be able to offer classes to the community because we would have no available funds to provide staff and a venue for the classes. We certainly could not do anything for our community nor could we go overseas to help those less fortunate than us. And we would have to forget about hiring other staff members to oversee particular ministries in our church. We would be forced to cancel mid-week services in order to save on utilities.

Does the gain of a few dollars in taxes really outweigh the loss of services to our community? I don’t think so.

The worth of a church to its community can’t be overstated. Fine, you don’t like their position on marriage and sexuality, I get it, but that doesn’t mean their efforts to serve the poor and needy without asking for money is worthless. When we consider the large number of valuable services performed by churches the idea of taxation becomes ludicrous. What if you ask a church about using their facilities for your wedding only to be told no, because it’s too expensive. Or maybe the church says, “Sure, you can use our facilities, it will only cost you $2,500. And the minister’s fee for pre-marital counseling, and performing the wedding is another $2,500.” These are services churches often offer for free or at ridiculously low prices no one in town can compete with. Why? Because they seek to serve the community.

Removing the tax exempt status of churches will eliminate such services and harm communities.

Some no doubt simply believe churches should pay taxes. Others however seek to close churches and reduce the influence they have on people and communities. What better way to do that than by creating a tax burden too large to bear? For many small churches in rural areas paying taxes would be a death sentence. But society would rise up in anger if anyone actually said they want to see churches close, so covertly they act to effect such an outcome.

The bottom line is that taxing churches will only harm communities. Taxing churches won’t decrease the debt or deficit. Taxing churches won’t bring more money to other groups. Taxing churches will only help close their doors, reduce their services, burden people, harm families, hurt the poor, and increase government control. In the end, we all lose.

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