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A recent Cracked.com photoplasty contest produced this image:

If churches paid taxes...

Is this image correct? Would taxing churches generate that much money, and would that much money be enough to cover food stamps and house the homeless? At what tax rate would churches have to be taxed (for example, a corporate tax rate, small business tax rate, etc.)?

(If you feel this question is overly broad, I'll accept an answer just about how much money could be gained at what rates from taxing churches, rather than what this money could cover).

  • 10
    Both answers are focusing on the $83.5 billion number. But your question (from the title) is actually "If American Churches paid taxes, how much revenue would that generate?" So I think it's worth noting that many churches would go bankrupt if forced to pay these taxes. So whatever the subsidies are, the government would not see an equivalent increase in revenue. (I'm posting this as a comment because I could find no estimate of what percentage of religious organizations would survive a cessation of subsidies...) – Kip Mar 6 '14 at 13:41
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    Also worth noting- many (most?) homeless shelters and soup kitchens are church funded, and might lose funding if churches went bankrupt or lost their income. So the net effect might not be so great for the hungry and homeless. But there's no doubt that many churches would go away, which is probably the real goal for most people who would advocate for an end to church subsidies. – Kip Mar 6 '14 at 13:44
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    churches aren't subsidized in the US – warren Aug 8 '14 at 19:11
  • @Kip And the churches that don't go bankrupt must probably get an additional source of income, which is usually donations, so the church goers are still the ones paying the tax, not the church itself (as such). – Martin Tournoij Jan 11 '15 at 13:20
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Summary: The graphic is based on an article from the Council for Secular Humanism which is almost entirely incorrect

It seems to be the case that the infographic is based on the report "How Secular Humanists (and Everyone Else) Subsidize Religion in the United States"., by the Council for Secular Humanism. The figures seem to agree, so it's reasonable to assume that the source of the graphic is the report. To assess the reliability of the graphic, we therefore have to assess the reliability of the report.

A Sanity Test

The annual amount given to religious organisations in 2009 was around $100 billion. We know this because the article cites it, and claims 'Giving USA' as a source. They claim that $70 billion is the tax due. The article is asking us to believe that churches, if taxed fairly, would pay 70% of their income in tax. (That's income, not profit.) No other corporation, profitable or not, pays anywhere near that level of tax in the US. A 70% rate is not "paying taxes the same as everyone else". (The Ford Motor Company, for example, had around $140B in income the year to 30 JUN 2015 and paid less than $2B in tax.)

Now let's look at the claims in detail.

The first thing that needs to be noted is that this report is not from a neutral source. The Council for Secular Humanism exists to promote secular humanism, which largely defines itself by the absence of religion, and Free Inquiry is not a peer-reviewed journal. This does not mean we reject it, of course - it means that we should apply a skeptical analysis to the report, which the rest of this answer will do.

Claims

These are the principal claims made by the report as to subsidies to churches:

  • Federal Income Tax Subsidy - $35.3billion
  • State Income Tax Subsidy $6.billion
  • Property Tax Subsidy $26.2 billion
  • Investment Tax Subsidy $0.041 billion ($41 million)
  • Parsonage Subsidy $1.2 billion
  • Faith Based Initiatives Subsidy $2.2 billion
  • Total $71 billion

The report seems to imply that these tax breaks are special to churches. In fact only one is (the parsonage allowance). The rest are available to other non-profits, whether they are religious or not, and whether they do any charitable work or not. For example, fee paying private prep schools get the same exemptions as a church, even if their sole purpose is to provide expensive education to the rich, who pay a large fee in return. It is likely that most churches could register for tax exemption under 501c, even if ‘religion’ were removed as one of the criteria. Community theatres and fraternal organisations (e.g. Moose Lodges and college fraternities) do this all the time. Secular humanist organizations are registered for tax-exempt status. The American Humanist Association specifically has tax exemption in the religious category., which means that atheist religious organizations are getting the same tax breaks as 'believing' religious ones. Even the Council for Secular Humanism itself is tax exempt.

Let's look at the claims of the individual kinds of subsidies.

Federal Income Tax subsidy

The report claims that “the subsidy to religion in the form of lost corporate tax revenue to the federal government revenue is about $35 billion annually". It has calculated this by taking the total annual donations to religious organizations (which it elsewhere states to be $100billion) and applying the top rate corporate tax rate to all of it. But corporate tax doesn’t work like that. Buinesses are allowed to deduct their expenses before their taxable income is calculated. Churches typically use most of their income on staff salaries, building maintenance, office equipment and the like – all of which are legitimate expenses, and would be deducted from income by any normal business. As we saw above, churches as they are now virtually never make a profit, and so would pay virtually no corporate tax. If they did make a profit they would not qualify for tax exempt status under today's rules. (Let's leave aside the fact that even highly profitable multi-national industry corporations don't pay 35% tax - 12% is more normal, and it's 12% of their profit, not their income). As we also saw above, most churches could also register as tax-exempt under other parts of the 501c regulations.

The $35 billion Federal tax figure is a fantasy, unsupported by anything from tax law or practice.

State Income Tax Subsidy

This falls by exactly the same argument as the Federal subsidy.

Property Tax Subsidy

The Council is very vague about how it arrives at its figure for the total value of church property. It claims (without support) that the average value of a church building is $1.7 million. However a quick look at churches for sale show that - even in a high real estate area - $1.7 million dollars will buy a modern well-equipped church suitable for many hundreds or thousands of worshippers. Most church buildings are much smaller than that. They also state that they arrived at the figure by multiplying the number of congregations by their claim of the average value of a church building. Many congregations do not own buildings at all, renting space to meet as required, or sharing space with other congregations. There is no indication that the report took this into account.

Churches have no special treatment regarding property taxes compared with other non-profits. Non-profits are frequently (not always) exempt from property taxes, but churches are treated equally with them We saw above that churches would almost certainly be able to register for tax-exempt status without the religious status. Many secular humanist organisations are probably tax-exempt, just like churches. It might be worth noting some other organizations that claim tax exemption here, including private schools, many of which have the sole purpose of providing fee-paying education to those rich enough to afford it. While the property tax exemption could be explicitly abolished for churches (putting them at a disadvantage compared with Moose Lodges, College Fraternities and private schools for the rich), in reality the $26 billion claimed would (probably) not materialize. The Property Tax figure is highly suspect, and is a benefit common to all non-profits, whether religious or not.

Investment tax subsidy

Once again corporations are not taxed on their investments, but on their profits. If your investment income is offset by business expenses, it isn't taxed.

Parsonage allowance

The parsonage allowance is a real subsidy, specific only to religious organizations. However all kinds of religious organizations are entitled to it, probably including even atheist 'religious organizations'. Note that it represents less than a fiftieth of the amount claimed in the report as a total subsidy.

Faith Based Initiatives

Payments under the Faith Based Initiatives programs are not simply made to churches for their own benefit - they are for specific charitable and social purposes. For example, if a church is running a homeless shelter, or a food bank, the Faith based initiatives program is allowed to pay towards the running of the shelter - in the same way that government is allowed to pay towards a shelter run by a non-religious organization. This is not a payment to the church, and the church does not profit from it. There are accounting controls in place to ensure this is the case. If all payments like this counted as 'subsidy of religion', then every payment to a secular charity (Oxfam, Save the Children or even UNICEF) would count as a 'subsidy of secularism'.

An aside - Churches as businesses

Council for Secular Humanists writes:

We calculated the subsidies to religions under the assumption that religions are more like for-profit corporations providing entertainment (such as movie theaters or amusement parks) rather than charities.

This is a highly selective comparison. Churches have many differences with a movie theatre – they don’t charge admission, and they don’t make a profit for two. It’s also worth pointing out that if churches did make a profit, they would fail the test of tax exemption under 501c, whether or not they were religious foundations. The report could have chosen other secular organizations for comparison – if we truly believe that churches are in the entertainment business, then a community theatre would probably be a better comparison. As we saw above community theatres are usually tax exempt.

NOTE:In response to some comments, when I say "Churches don't typically make a profit", I don't mean that in any complicated sense involving share dividends; I mean simply "Churches don't typically have significantly more income than expenses". Any church treasurer will back this up.

Conclusion

  • The Federal and State Income Tax subsidies are entirely mythical. Treating churches as a business would not bring in any of the $35billion federal tax, nor the $6 billion state tax claimed. The investment subsidy falls in the same category.
  • The Property Tax Subsidy applies to all tax-exempt non-profits, including those with no ‘charitable’ activity. It is highly likely that churches would qualify under one of those conditions, even if religion were excluded as a specific grounds for status. In any case the figures given are highly questionable.
  • The Parsonage subsidy is real, and if abolished would bring in about $1.2billion.
  • The Faith-Based Initiatives program is not a subsidy to the churches, any more than contributions to Oxfam are a subsidy to secularism.

The real level of subsidy is much, much less than $70 billion, and of that tiny subsidy virtually all could be claimed by a similar non-religious organization.

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    Actually I'm pointing out that the report calculates a number based on a lot of guesstimates and opinions (and some fabrications). – DJClayworth Mar 5 '14 at 14:13
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    It seems to me these questions are not used for real inquiry, but to masquerade as skepticism to further the cause of secularism – Mauser Mar 14 '14 at 21:33
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    @Avi - Oddthinking's answer is (unchareristically for him) incredibly poor and awful and mostly equivalent to copy/pasting a PR release. He didn't even mention the fact that the "study" the #s are based on is basically made up BS with more faulty assumptions than facts. It's equivalent to saying "If avi made $1Mil, US government would get 500K in taxes". Leaving aside that avi isn't making $1Mil; isn't (AFAIK) subject to US tax jurisdiction; and won't be taxed at 50% even if was. Other than that, the answer was accurate. – user5341 Apr 2 '14 at 13:21
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    @JonathonWisnoski The Parsonage allowance is specific to the church. It could be abolished without affecting churches tax exempt status in other ways. Most non-profits and charities pay no tax. – DJClayworth Dec 23 '14 at 17:53
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    @Clockwork-Muse I stand corrected. It also appears likely that atheist organizations could claim the parsonage allowance. A recent lawsuit alleging that atheists were discriminated against in respect of this allowance fell apart when it turned out that the organization bringing the lawsuit hadn't applied for it. – DJClayworth Feb 24 '15 at 21:35

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