The Purpose of the Exemption
Tax exemption for churches protects religious entities from the state. Giving government authority to tax religious entities not only breaches the protective wall of separation that guards the church from the state, but effectively knocks that wall down.
Religious values have long infused American public life and law, yet as institutions, church and state are distinct institutionally. Giving any government, whether federal, state, or local, the legal authority to tax property belonging to religious entities is only a first step toward making churches institutionally subservient to that government. This is a dramatic departure from the very foundation of our country, one informed by the belief that religious liberty is pre-governmental and removed from the management of the state.
In addition to its protective role, tax exemption for churches brings great and often ignored benefit to society. To tax churches would be to diminish that benefit so substantially as to cripple it, thus adversely affecting the common good of innumerable communities and, in aggregate, the nation.
Erik Stanley of the Alliance Defending Freedom suggests three ways in which tax exemptions for churches provide inestimable social benefit:
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, provide numerous social services for the downtrodden among us, and reach out to the "least of these" in thousands of different ways. 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 ...
(Second) ... 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 they exist.
(Third) ... there is also a constitutional reason why churches are tax exempt. Our history is one of an unbroken practice of exempting churches from taxation. Churches were exempt from the very first time the tax code was passed at the federal level, and have remained exempt in every iteration of the tax code ever since. Every state in America also exempts churches from property taxes. When the U.S. Supreme Court decided a case regarding the property tax exemption of churches, called Walz v. Tax Commission, it stated that providing a tax exemption for churches was a less intrusive option under the Constitution than requiring churches to pay taxes.
There is a final reason why churches are not taxed: As noted above, by providing both immediate practical benefits to their communities and intangible benefits related to healthy families and a more civil society, the church relieves government of a significant part of its public duties. Yet there are those who would like that relief voided for the sake of government usurping, much more actively, the social ministries of the churches.
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