Some Clarity on Tax Exemption, Part Two

In the previous post, I tried to make the case that non-profits are subject to several forms of taxation and that taxing non-profits further will either put a lot of good works out of business, or result in targeted discrimination. Now for a brief argument from religious liberty.

Tax Exempt Status is a Necessary Component of Religious Liberty

In a twist of mental gymnastics, those who fight most ferociously for the separation of church and state are now fighting the hardest for the entanglement of church and state.

Taxation is a form of behavior modification. It is an economic axiom: if you want less of a behavior you tax it, if you want more of it you tax it less. For example, states and the Federal government levy what are called "sin taxes" under the presumption that gambling, smoking, and drinking are detrimental to society. (Handily, they can also be taxed at high rates and people still engage in those activities leading to higher revenues.) On the other hand, the Federal government provides tax write offs for many activities including home ownership and charitable contributions. The tax write offs are intended to encourage certain behaviors. Plenty of candidates over the last 20 years have included tax benefits for renewable energy use in their platforms because they want to encourage the purchase of electric cars and the installation of solar panels. Behavior modification.

As such, the tax exemption of religious organizations operates under the principle of not letting the nose of the camel into the tent. If you let the nose in, the whole camel follows. Taxing religious organizations is a great way to allow the Federal government and the State to begin regulating the speech and behavior of churches. The Supreme Court has said so. In the 1970 Waltz ruling, the Supreme Court said that tax exemption for churches, "creates only a minimal and remote involvement between church and state and far less than taxation of churches. [An exemption] restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other....the power to tax involves the power to destroy." Taxing churches and religious organizations is a fast-track to entangling church and state, severely reducing religious liberty and speech, and creating a state-sponsored church.

If the Federal Government and the State begin holding certain ad hoc guillotines over the heads of religious organizations, the inevitable consequence will be churches doing one of two things: engaging in civil disobedience, or capitulating and becoming a de facto extension of the state's politics. And history tells us that every time churches capitulate to the state's demands, the pews grow cold when the dust settles the culture realizes that those churches were faithless and lacked the courage to fight for their beliefs.

Photo from USHMM