Plainfield
Religion and Taxes
“In view of their favored tax position, with reasonably good management, America’s churches ought to be able to control the whole economy of the nation, within the predictable future.” This was said almost seven years ago by Eugene Carson Blake, a former president of the National Council of Churches and now the General Secretary of the World Council of Churches.
With April 15 less than a week in the past, hardly one of us are free from the knowledge of the substantial portion of our income which goes for taxation; furthermore, what a massive segment of our national economy is represented by the Federal Income Tax.
You may or may not feel strongly about the favored tax position enjoyed by religious institutions. But as it does cost you money, you might consider some of the facts. Therefore I would speak to you of some of the tax privileges enjoyed by churches and religious orders in the framework of the historic constitutional principle of the wall of separation between Church and State.
Last year many of us opposed the passage of the New Jersey legislation to provide free bus transportation to private school students. Among the arguments were not only those of the historic separation principle, but also the unfairness of such a tax levy for non-public bus transportation. Various costs were mentioned, but I know of no summary of costs for the State. But certain instances can be cited which cost the taxpayer money:
A Watchung mother is being paid $4800 a year to transport her children and two other children to private schools in Summit and Morristown.
In Franklin Township, one child is driven by car to Edison at a cost of $1800 per year. There are numerous similar cases. The Plainfield Board of Education provides for transportation of more than 700 students to parochial or other private schools.
However this N.J. busing law is but a small part of an issue that becomes increasingly formidable – religion and taxes.
The public responsibilities made necessary by our chaotic social conditions require much larger revenues be obtained for taxation; religious institutions, almost entirely free from tax burdens create a disproportionate burden which must be carried by individuals and profit-making corporations.
The war in Vietnam requires public money which is becoming an intolerable burden. But even with negotiations beginning to be a possibility, the 70 billions yearly required to keep our military-industrial complex fat and happy is unlikely to be substantially or quickly reduced. I wish that it could, but realistically it is unlikely.
The problems of poverty, trouble in the cities, housing, jobs, education, demand a substantially larger investment of public funds than ever has been so appropriated. But there is not a readiness to vote the needed monies. It is commonly said that the reason the President does not appear before the Congress pleading for large grants for immediate impact in the cities is because he is sure that Congress will not vote such funds.
Even at present levels of spending, a tax increase is generally believed to be essential to preserving the stability of the economy. Governor Hughes this week told a conference of mayors that large increases in state taxation would be needed to fund essential programs in the cities.
By using a few of many statistics available, I would like to make the point that the tax-exempt property and income of religious institutions are becoming increasingly important factors in the taxation systems because they represent such large portions of property and income.
Many of the facts to be mentioned are drawn from this little book, CHURCH WEALTH AND BUSINESS INCOME, by Marin Larson. Published a couple of years ago, the chances are strong that religious wealth is more today because of natural growth and inflation.
If one considers the visible national wealth, the approximate assessed valuation among the three major faiths are:
There are of course other types of tax-exempt land than religious charities, foundations, etc. But religious corporations hold the majority of such tax-exempt wealth.
LAST TWO PP, p. 51
IN part of his book, the author takes four American cities, Buffalo, Baltimore, Washington D.C and Denver, and analyzes the property held by religious institutions.
Consider Buffalo – Buffalo is a large industrial city, decaying at the core and with the urban problems and disorders which are becoming alarmingly typical. In 25 years, the White population has declined by more than 100 M and the Black population has grown 70 M.
Buffalo faces a double tax squeeze – the taxable real estate is deteriorating – age, lack of repair, neglect, while at the same time more and more property is being removed from the tax rolls. For example, in 1930, taxable property was assessed at one billion, 65 million and the exempt at 195 million. By 1963-64, the taxable had declined to one billion 36 million but the exempt had risen to 458 million. This included government property as well as the private exempt property. There is a denominational breakdown which should be of interest
Quote p. 13
The large amounts of religious property exempt from local property taxes is only a part of the picture because there are many extraordinary benefits granted to religious institutions by the Internal Revenue Service.
No one knows how many tax-exempt organizations there are in the U.S., but there are hundreds of thousands. “Any organization which can qualify for exemption from local property taxes ... is exempt from taxation on income derived from interest, dividends, royalties, rents, or capital gains.” (p. 68)
Further, churches “occupy a special position under Internal Revenue Service, ...”
Quote, p. 61
Quote, p. 63
What can be done? Perhaps the reason to maintain the special privileges is compelling enough so that we should not be concerned that exemptions may represent an annual amount of billions of dollars lost to the public order.
The strongest argument to maintain tax-exemption privileges for religious institutions is that such exemptions are necessary in order to maintain the historic wall of separation between church and state. The power to tax is the power to destroy. The government could effectively render any religious enterprise impotent through the use of taxing powers. One of the famous cases of the 1950s was that of a Unitarian church in California[; it] was threatened with a loss of tax exemption because it refused to sign a loyalty oath.
Inasmuch as churches and their spokesmen must in the nature of things take stands sometimes severely critical of the government, then government should not have the power to squelch or retaliate through the tax system.
Then there are those who say the Church should pay taxes. The enormous growth of church property and wealth creates a situation of financial hardship for citizens who do not have such exemptions. Furthermore, in a nation such as ours where approximately 1/3rd of the population has no particular religious commitment, why should they pay equally in support of religious institutions?
I began this with a quote from Eugene Carson Blake. He also said, “When one remembers that churches pay no inheritance tax ... that churches may own and operate business and be exempt from the 52% corporate income tax, and that real property used for church purposes is tax-exempt, it is not unreasonable ... that the churches ought to be able to control the whole economy of the nation within the predictable future.”
A third position would be that the churches should retain tax-exempt positions for its worship halls but should reimburse communities for some portion of services received, such as police and fire protection, roads, sidewalks, etc. Last year one neighborhood Unitarian church, Montclair, voted a voluntary contribution of $1,000 to reimburse the community for some of the essential services received.
I believe one of our Cleveland churches took similar action. I also believe church properties such as parsonages and other residential properties should be placed on tax rolls.
Furthermore, there would seem to be a real injustice in [a] church-operated business operating tax-free. Such enterprises are in competition with private companies. Consider this from Mr. Larson’s book:
Quote, p. 66
Quote, p. 73
Therefore when the function of a religious group is clearly that of a business enterprise, the business should be subjected to the same tax burdens as must be carried by all others.
What can we do? We can be aware of this problem which constantly increases in magnitude. For example, someone with a sharp pencil could do a study of Plainfield. How much tax revenue would be received if some or all tax-exempt property should be on the tax rolls? What is the value of church property?
Then too, perhaps all religious institutions should be required to disclose their wealth – not only real estate, but other holdings – cash, stocks, bonds, etc.
There is no expectation of any sweeping changes occurring in the tax-exempt religious structures, but certainly the trend of increasing wealth for religious institutions in a time when there is crying need for more money to rebuild the cities, provide real opportunities and training, and a staggering additional list of community and national needs, should make us all think through again the matter of the tax-free ride for religious institutions.
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