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Tequila
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01 May 2013, 5:21 am

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Should Churches be Tax Exempt?

It’s a question we’ve struggled with for years — what constitutes true separation of church and state? Is there a line that we cross allowing religion to influence government? Is influence even a fair word?

These are all hard questions to answer and, in a country where upward of 76 percent of the population considers themselves Christian, it would seem these are important questions we face.

Throughout history, we have tried to separate church and state, but is exempting America’s churches from paying taxes reflective of separation, or cohesion? That question could be one of the murkiest we face at this time, with strong arguments on both sides.



AngelRho
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01 May 2013, 8:09 am

Tequila wrote:
Quote:
Should Churches be Tax Exempt?

It’s a question we’ve struggled with for years — what constitutes true separation of church and state? Is there a line that we cross allowing religion to influence government? Is influence even a fair word?

These are all hard questions to answer and, in a country where upward of 76 percent of the population considers themselves Christian, it would seem these are important questions we face.

Throughout history, we have tried to separate church and state, but is exempting America’s churches from paying taxes reflective of separation, or cohesion? That question could be one of the murkiest we face at this time, with strong arguments on both sides.

In the case of Christian congregations, they aren't really tax exempt. A church body is an assembly of people who meet together for Bible study, homilies, and worship. They aren't working together to make a profit or run a business. Tithes and offerings that are brought into the church only go to paying personnel, and personnel in many churches, if not the majority of churches, are volunteers who don't get paid. I even know some clergy who aren't paid. Besides staffing, money brought in from the congregations also go to support charitable community programs, other charity work, and supporting missions at home and abroad. It can't rightly be said that tithes and offerings count as profit since, for temporal purposes, that money belongs to all congregants as property held in common (we believe it's God's money, not ours, and thus we are only stewards of it).

Since it is, as far as the state is concerned, property held in common, it's already taxed. The church is not a separate entity but rather an institution made up of like-minded people. Those people already pay taxes. Therefore the church already pays taxes since the taxes come from people who earn taxable income. There is no point in taxing the church.

I work for a church, and my salary is quite competitive considering what I do. They want to make it as difficult as possible for me to look for work elsewhere, and they've succeeded. It's a good problem to have. But it also carries with it the burden of knowing that the money I receive comes from the tithes and offerings of my fellow congregants. So despite the fact that I'm working for the church and receiving money that's already taxed, it still counts as profit that I make as an individual. So, guess what? That means I get taxed on it even though I'm working for a religious institution. Just because I work for a church doesn't mean I get out of paying taxes. The church itself, being a body of believers, i.e. private individuals, is already taxed and can/should be counted as tax-exempt. The people who work for churches are making money as private individuals and thus can/should pay taxes.

If an entity that calls itself a church IS making a profit, i.e. selling products such as books, music, apparel, etc., then it is doing business as a corporation and should be taxed. Word/faith groups are a prime example of preachers becoming millionaires through receiving "gifts." They are effectively doing business and should be taxed as such. I think if you're pulling down enough figures to afford a mansion with an 8-car garage and fly around in a private jet, it's a profit scheme. I also disagree with a church that, say, starts a record label, pays their musicians, and keeps the remaining profit from album sales and concert tours, the whole time hiding behind the "church" designation to get out of paying taxes. My understanding is that all you have to do is just not pay the musicians. That way it is still a charitable action and the proceeds go to supporting the broader ministry. But, still, I think musicians deserve to get paid for gigs, even church gigs, and that selling products of whatever nature should be seen as taxable income, no matter what the organization does. I'm not aware of specific churches that do this, I just mean I wouldn't be surprised.

Something I don't understand is why the IRS threatens to revoke a church's tax exempt status for supporting political causes. At issue here are issues of morality that become politicized when the church might otherwise remain silent on the issue. You cannot reasonably expect an institution, especially a religious one, to remain silent when political actions directly or indirectly affect the church. (Re)legislating morality, for instance. The IRS has threatened churches in the past with revoking tax exemption, but those threats only seem to be symbolic. To my knowledge, no church has actually lost tax exemption for supporting political causes.

And you really don't want to go there. You can't tax people or organizations without representing their views through legislation. Taxing churches end separation of church and state because churches will then seek to influence legislative decisions (if you tax them, they deserve a say in policy-making). Private individuals who belong to churches already do this as individuals...AND they pay taxes. Do you really want to find out what it would be like if churches start voting in blocks? I don't. I'm a person of faith, I have certain attitudes regarding postmodern culture, and I don't even want to see that happen. The reason why is once government is forced to recognize church entities as voting blocks who can have a major impact on legislation, the government can then pass legislation that establishes religion as supported by the state. I like my religion and I don't need anyone else telling me how or when to worship otherwise. I already, at least for now, have the right to speak my mind and persuade others to believe as I do. I'd love it if everyone practiced Christianity the way I do. I don't want to see the rights of others to make up their own minds taken away any more than I want to risk losing my own rights. Taxing churches is a terrible idea unless you're willing to represent their ideas and end separation of church and state or possibly establish a state religion based on a religious majority.



Fnord
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01 May 2013, 11:08 am

Churches and other religious institutions should pay taxes on their incomes just like any other money-grubbing corporation.



bryanmaloney
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01 May 2013, 11:37 am

Fnord wrote:
Churches and other religious institutions should pay taxes on their incomes just like any other money-grubbing corporation.


Of course, then charities should also not be tax-exempt. Indeed, why exempt any activity or group at all? Tax exemption is just a form of government-sponsored social engineering, to "encourage" what the government likes.

Flat tax, no exemptions for anybody or anything. That is the only justice.



AgentPalpatine
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01 May 2013, 11:43 am

AngelRho wrote:

Since it is, as far as the state is concerned, property held in common, it's already taxed. The church is not a separate entity but rather an institution made up of like-minded people. Those people already pay taxes. Therefore the church already pays taxes since the taxes come from people who earn taxable income. There is no point in taxing the church.


While I don't take a stance on your other discussion points, I do have to put out that if those individuals get a benefit from the tax deduction for charitable contributions, they didn't pay (Federal Income) taxes on that money.

Also, I was under the impression that most organizations, particularly ones that solicit for funds and/or pay employees, are separate entities under the laws of their host jurisdiction.


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01 May 2013, 11:49 am

Churches should be free to operate as not-for-profit corporations just like any other artistic, charitable or social enterprise. That's not the issue.

Churches have, historically, received two important concessions:

1) Real property held by congregations has been immune from property tax (but not municipal service levies)

and

2) Government has made tax expenditures on behalf of contributions made to congregations. (Because at Common Law, religious activities are prima facie charitable).

I see no particular justification for congregations to be exempt from property tax. They receive a full suite of municipal services, and should pay for those services like any other landowner.

As for the availability of tax deductions or credits for donations to congregations, I am more sanguine.


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01 May 2013, 1:35 pm

bryanmaloney wrote:
Fnord wrote:
Churches and other religious institutions should pay taxes on their incomes just like any other money-grubbing corporation.


Of course, then charities should also not be tax-exempt.


Not sure I see how these are analogous. Yes, a church can engage in charitable activities but its primary purpose is the practice of religion, which is not a charitable activity.



AgentPalpatine
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01 May 2013, 1:48 pm

ScrewyWabbit wrote:
Not sure I see how these are analogous. Yes, a church can engage in charitable activities but its primary purpose is the practice of religion, which is not a charitable activity.


Most jurisdictions would disagree with you. To use the biggest jurisdiction as an example, 26 USC 501(c)(3) expressly includes religious institutions within it's scope.


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visagrunt
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01 May 2013, 3:03 pm

ScrewyWabbit wrote:
Not sure I see how these are analogous. Yes, a church can engage in charitable activities but its primary purpose is the practice of religion, which is not a charitable activity.


The Common Law has established the definition of charity has four elements: the relief of poverty, the advancement of education, the advancement of religion and
and any other purposes that benefit a community in ways that courts have determined to be charitable.

This definition is grounded in the preamble to an English statute that is over 400 years old, the Charitable Uses Act, 1601, which was still good law when the United States and her Common Law states received the Law of England & Wales.

This definition is so well established in the Common Law that Canada has never seen fit to define the term "charity" in the Income Tax Act, and has, in fact, created other categories to cover analagous activities like the performing arts which the government has decided merit favourable tax treatment but do not fall within a strict Common Law definition of charity.


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CSBurks
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01 May 2013, 3:33 pm

I think everything should be tax exempt.



AngelRho
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02 May 2013, 11:03 am

AgentPalpatine wrote:
AngelRho wrote:

Since it is, as far as the state is concerned, property held in common, it's already taxed. The church is not a separate entity but rather an institution made up of like-minded people. Those people already pay taxes. Therefore the church already pays taxes since the taxes come from people who earn taxable income. There is no point in taxing the church.


While I don't take a stance on your other discussion points, I do have to put out that if those individuals get a benefit from the tax deduction for charitable contributions, they didn't pay (Federal Income) taxes on that money.

Also, I was under the impression that most organizations, particularly ones that solicit for funds and/or pay employees, are separate entities under the laws of their host jurisdiction.

I'm not sure I think deductions as they stand are entirely fair for everyone. I'm sure there are some loopholes being abused. But I'm not in favor of closing ALL loopholes unless we agree on a flat tax across the board. I don't agree that paying a higher tax rate on higher income is fair.

But the thing about deductions is this: One can give more to a charitable organization such as a church that they trust to manage contributions well, or one can pay more taxes to a government that has a history of mismanaging funds or redistributing wealth in morally questionable ways. The money is going to people who need it either way...it's just a matter of who decides where it should go.

My family is currently under the poverty line, though we do have everything we need and don't need to rely on charities for our basic needs. We purposefully claim 0 dependents despite the fact we have three children because it helps us make sure we don't underpay come April 15. We always end up losing part of our tax refund because my income isn't steady from month to month, therefore I don't pay taxes on it. And if we itemized our charitable giving through tithes, offerings, and other giving outside church, we still wouldn't contribute enough to exceed the standard deduction. Therefore we just take the standard deduction when we file. Due to low income and the three children and in spite of me not paying quarterly taxes, we still get refunded a pretty nice chunk. We keep it in a savings account and use it to pay for our kids to go to a good school.

It's only if a person is donating a sizable, and I mean a huge, significant amount of money...ok, a few thousand a year, but that's more than we ever have...that they can even claim those deductions. And those people are still paying a heckuva lot more in taxes than we'd ever dream of making. Where it hurts is with middle-class folks who make too much money to get any benefits from anything more than standard deductions but not enough money to get any assistance themselves when they desperately need it. I know middle-income families who were able to go to the church and say, "hey, we can't keep our lights on this month. can you help?" and the church pulled through for them. The same church will buy quick, cheap meals for any random homeless person who rings the doorbell. These are people who just can't make it on government assistance alone. So, I mean, it doesn't really matter if people itemize deductions more than the standard deduction. The money is going where it is needed. The difference is the service provided, and I honestly trust a small-town charity, especially a church-based one, more than the government any day. It's not like the wealthy are paying less taxes than we are, even with the deductions. The rates are sufficiently high enough that a lot of their money still goes to the government anyway. And besides, the more money they save with the deductions, the more money they have to contribute to charitable giving.



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02 May 2013, 2:29 pm

visagrunt wrote:
ScrewyWabbit wrote:
Not sure I see how these are analogous. Yes, a church can engage in charitable activities but its primary purpose is the practice of religion, which is not a charitable activity.


The Common Law has established the definition of charity has four elements: the relief of poverty, the advancement of education, the advancement of religion and
and any other purposes that benefit a community in ways that courts have determined to be charitable.

This definition is grounded in the preamble to an English statute that is over 400 years old, the Charitable Uses Act, 1601, which was still good law when the United States and her Common Law states received the Law of England & Wales.

This definition is so well established in the Common Law that Canada has never seen fit to define the term "charity" in the Income Tax Act, and has, in fact, created other categories to cover analagous activities like the performing arts which the government has decided merit favourable tax treatment but do not fall within a strict Common Law definition of charity.


Well, that certainly explains why churches are currently tax exempt under current law. I'd say, however, especially since this discussion is about *should* churches be tax exempt, that this is a very broad definition of charity. Charity is supposed to be about helping others, especially the needy. But rather than helping, it can be argued that religion does more harm than good.



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02 May 2013, 5:50 pm

No


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02 May 2013, 5:56 pm

Fnord wrote:
Churches and other religious institutions should pay taxes on their incomes just like any other money-grubbing corporation.


They should also pay for police and fire protection services just like all other property owners.

ruveyn



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02 May 2013, 6:24 pm

ruveyn wrote:

They should also pay for police and fire protection services just like all other property owners.

ruveyn



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02 May 2013, 6:39 pm

I will support churches being tax free when they begin to operate as charities, with all the accounting and balancing that requires.

Until then, they are a business and should be taxed as such.


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