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Should Uncle Sam Tax Churches?

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Are America's churches preventing NASA from winning the space race?

Given SpaceX's recent completion of the first-ever privately run mission to the International Space Station, and NASA's wildly improbable and spectacularly successful landing on Mars, it actually looks like we're doing OK in space. And yet, if you haven't heard, there's a new photo that's been making waves on the Interwebs lately that argues the contrary:

Tax churches - Space program

No one's quite certain who thought it up, but the photo's footnotes suggest it probably originated with a June column in USA Today. That column, in turn, cited University of Tampa professor Ryan Cragun, who argued that if you add up the value of all the tax exemptions religious organizations receive -- on tithes, capital gains on church assets, and so on -- the IRS probably loses $71 billion in potential revenues. In other words, enough money to pay for 28.4 "Curiosity" missions to Mars annually.

Is it true?

Lord Knows...

Maybe, maybe not. The fact that most churches in the U.S. are tax exempt (as nonprofit organizations) tends to yield inexact calculations of assets and income numbers that, even if known, still wouldn't be taxed. (So why bother?) It leads, too, to some wild-eyed guesswork among pundits.

For example, in a Huffington Post column last year, former White House staffer Jeff Schweitzer made the broad assertion that church real estate assets in America could be worth anywhere from "$300 billion to $500 billion." With state property tax rates in the U.S. averaging about 1.5%, this suggests potential "lost" property tax revenues of $7.5 billion.

As for the rest of the taxable loot, most of it comes from tithes and offerings. While not all such donations are reported or taken as tax deductions by the givers, The New York Times puts the value of charitable donations to churches in 2009 at "about" $115 billion. Taxed at a 40% combined federal and state corporate tax rate, that's another $46 billion in revenue foregone by the tax man.

Result: These two items alone bring us within spitting distance of Prof. Cragun's "$71 billion." Add in tax exemptions for capital gains, "parsonage allowances," and individual tax deductions for charitable donations, and the professor's assertion looks close to the mark.

But the question remains: If we tap this treasure trove of potential tax revenues, what then? Will we really be able to turn Mars into a space-rover parking lot?

Taxing ChurchBe Careful What You Wish For

The money's there for the taxing, no doubt. Proponents of religious tax exemptions, however, warn that if you do tax the Church, the social consequences will be dire.

Charitable institutions, by definition, spend money on charitable works. Take the money away, and the charity goes away, too -- and the government might have to step right back in and use its new tax revenues to make up the difference.

So how does this argument stand up to examination?

A 2009 study of church revenues and expenditures, conducted by NationalChristianPoll.com on behalf of Christianity Today International, found that salaries for church employees consumed approximately 38% of annual church revenues, with building maintenance eating up a further 12%. Add in a host of other expenses, though, and most churches were still able to allocate at least 17% of revenues to the categories of "ministries," "domestic missions," and "international missions," with further funds going to "Christian Education," "educational institutions," and "summer Bible school" -- all of which can broadly be defined as charitable work.

This broadly accords with a similar 2009 study reported on ChristianPost.com, which reported that on average, 14.3% of church revenues in America went toward charitable work.

Taking the more conservative of these numbers, this suggests American churches spend about $16 billion on charity. Even after you factor in spending by religious institutions from other faiths, though, the total's still nowhere near $71 billion -- and that's the real import of this research.


Two Things Are Certain: Taxes, and Death by Taxes

If the IRS were to siphon $71 billion from America's religious institutions, as Prof. Cragun (and the anonymous Internet poster-maker) urge, two effects seem certain:
  • First, church charitable work would be decimated. With 62% of annual tithes and offerings being diverted to the IRS, churches would be hard pressed to find funds for charity. (Government would step in to fill the gap, of course, but at the expense of at least a half-dozen of Prof. Cragun's rovers.)
  • Second, because after-tax income would no longer cover the bills, churches would need to seek money elsewhere to pay their expenses. Presumably, they would have to sell off church assets to raise funds. The result would be a smaller Church presence in America, and incidentally, less and less tax revenue for the IRS with each passing year.
In sum, Prof. Cragun is right that taxing the Church would generate money for the IRS -- but probably a lot less money than advocates of Church-taxation suggest, buying a lot fewer rovers than we were promised.

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Lord Xenu

Non-church groups receiving tax exemptions must annually file a detailed 990 statement itemizing where the money has gone. The IRS automatically waives the 990 requirement for churches. Not only do the churches not pay taxes, they do not even disclose their finances and are accountable to no one! Why should I have to pay more taxes to make up for the lost tax revenue of these "holy" institutions - many of which spread hate and discrimination rather than charitable acts?!?

February 20 2013 at 10:49 PM Report abuse rate up rate down Reply
canwebesure

My compliments to Ryan Cragan et al for this research study. I have been working on this and all other so-called "non-profits" for years. When will U. of Tampa tackle the hundreds of thousands of other "non-profits," from the massive Red Cross, to the "think-tanks?" The flip side to this, and I did not see it within this article is that the "donors" are also able to write it off on their taxes, so it is a double hit on we the people. Please take this on next professor Cragan. I know of people who only give their bucks to the registered 501(C)3,4,5,6...the dot orgs. Some even have their accountants or tax lawyers factor their taxes backwards. The basic instruction to them is basically; "How much more do I have to donate to a registered non-profit in order to reduce my tax liability? Those in America who have revealed their income taxes show that they only give their money to religious institutions or registered 501's for the tax benefit. Since hurricane Katrina I have made a serious effort to follow this money. It is amazing how little of the total sent in to the "saving organizations" went unspent. We all remember, "Text Karina" and away goes ten bucks. Sandy is having the same impact. If the churches, synagogues, and all other religious institutions practiced what their Holy books stated then even the devastation of Hurricane Sandy could be paid for by them with their giving hearts. In my effort I have found six groups who do great things in America and refuse to be a registered non-profit; as they know that it is we the people, the American tax-payer who is really footing the bill. The one who I feel does the most good in saving the lives of American children is Focus Adolescent Services, www.Focusas.com. Send them a buck or two, but remember it is not a tax write-off. If you all would like I will provide the other groups who understand the true nature of giving, and how to squeeze every nickel.

November 01 2012 at 1:25 PM Report abuse rate up rate down Reply
richikid

RELIGIONS ARE CULTS.........TAX TO THE MAX !

August 27 2012 at 1:50 AM Report abuse rate up rate down Reply
richikid

tax ALL Churches !

August 27 2012 at 1:49 AM Report abuse rate up rate down Reply
Bill

Who funds the church, the church members, more good is done with that money than funding Pelosi Airline or Joe Biden golf trips.. Why is it when people talk about spending the only programs that need saving are teachers firemen, police the space program Those conferences to Las Vegas are a must???? The church is the vehicle for much good in this country, this is more of an attack on religion than it is a tax issue...Especially if brought up on Motley Fool...

August 26 2012 at 9:43 PM Report abuse rate up rate down Reply
hhandyman

Only if Churches sell products as any business and calling a product a gift for a contribution should not eliminate sales taxes on the value of the premium given it is still a camouflaged sale of products If the Church is giving out food freely it should not be taxed but if its a paid meal that should be taxed like any restaurant meal games of chance should be taxable if the winnings have a cash value over 10 dollars Tithing should not be taxed or other direct gifts to a Church fund to be used for Charity if it is used for the payment of a salary for the local leadership that should be taxed as income tax for that Leader. If it is used for Charity work and the workers are volunteer with no income from it no taxes but if they are paid standard income taxes should be collected for that worker The costs to run the utility should not be taxed Any assett used for business that is not faith related should be taxed Such as Warehouses and the like if used to supplement income of that Church Standard capitol gains taxes on any stocks or bonds owned by a Church should be taxed as an individual. but the sanctuary and housing of a volunteer group (unpaid workers) or at best work for Food and board should not be taxed but any salaried worker the value of the use of the home should be taxed as part of the income of the paid staff (rent value) and the house should have property tax paid on it. Centenary lots owned by the people interred should have no tax value and should not be able to be taken by eminent domain But be free of any intrusion by private or corporate individuals regardless what added value it may have as a mall or residence.

August 26 2012 at 12:14 PM Report abuse rate up rate down Reply
mjf

BY ALL MEANS TAX THEM ALL ENOUGH IS A ENOUGH ALREADY

August 25 2012 at 7:57 PM Report abuse rate up rate down Reply
nomad1440

Will some one finally get the picture. Tax the churches of course . They want to lobby and have the percks . Taxe'm all.....

August 24 2012 at 7:39 AM Report abuse +2 rate up rate down Reply
joohbloe

You are darn right churches should be taxed. Many are owned and operated by huge multinational organizations. They operate much like franchises kicking a percentage back to corporate. A huge amount of the so called charitable work is really marketing and advertizing.

Why should the doctor that saved my life be taxed while the charlatans trying to run my life not be taxed?

August 24 2012 at 12:51 AM Report abuse rate up rate down Reply
wwhetstine

Wow, the spelling correction is harsh. Bad Typing!

August 23 2012 at 10:56 PM Report abuse rate up rate down Reply