Hi all, just a quick question. Does anyone have any rough idea how much money would be raised if all America’s religious institutions lost their tax exempt status? Just curious. Thanks in advance.
Would you tax them on their “profits”?
Which expenditures would you allow as ordinary and necessary business expenses?
The entire system is set up around tax exemptions. If you change that you have to do a million things at once. Take property taxes. What is the proper assessment for a church, or rectory, or church school, or community center, or hospital, or all the other buildings that a religious organization has? They don’t sell in any open market. They aren’t really comparable to other buildings. They’re often built on land they wouldn’t otherwise occupy unless they knew they didn’t have to pay taxes on it.
Now, go through and try to figure out all the other non-comparables. What is the salary of a cloistered nun?
You can’t do it. You can’t figure out the numbers today. And if you did impose a tax, then everything would change because churches would have to either get rid of everything they owned, or move all their buildings, or raise enormous new revenues. Nobody could possibly foresee what changes would occur from the millions of individuals decisions that had to be made.
It’s not a quick question. It’s an impossible question.
Exapno, I’m very surprised that you started with property tax. Our church is looking to buy a new building, and I can assure you that churches most certainly **DO **sell in an open market.
Not that I think NPOs should be taxed, of course, but property taxes would actually be reasonably easy to apply, albeit not with the same level of certainty as private homes or commercial buildings.
I don’t know where you live or what your religious building stock is like. In some areas that may well be true.
However, I spent more than a decade working for my local city government. Property taxes were a concern at all times. We kept a careful eye on all possibilities of turning an exempt property over to the tax roles.
Churches - and I’m using that word to cover all denominations, including synagogues - tended to be old and established. Many of them had been around since the 19th century. Downtown was dotted with tiny old churches in prime building spots.
Both Jews and Catholics had difficulties keeping their buildings open, because their congregations had been moving to the suburbs for decades. Even so, those buildings tended to close without being sold or else were converted to another exempt use. And the main buildings, the cathedral equivalents, never closed.
A city has hundreds, possibly thousands, of church buildings that have never had a proper assessment. When one does come onto the market, it is an ad hoc and usually very contentious process.
If you have other experiences I’d certainly be interested in hearing them. However, I simply can’t imagine trying to do this process for the entire U.S. It would make atheists believe in hell. 
You could do a halfway measure: tax religious institutions on the lot value only. This would keep them from getting hit with a full tax burden all at once, and be much, much easier to calculate. What’s an average church sit on, an acre or two? In my neighborhood that means a 1-acre church facility would pay about $2,000 a year in property taxes. That sure doesn’t seem onerous to me, and when you consider that the property taxes pay for services that the church enjoys (sewage treatment, firefighting, etc.) it seems like they ought to be paying something.
The majority of revenue raised from eliminating religious organizations’ tax exempt status would come from individuals. Their donations would no longer be tax deductible.
Hahahahhahah. You see my location indicator? People from other areas tend to drop over when they hear what our taxes are. I live on a third of an acre. I have to pay city and county taxes. They total well over $5000 a year.
Those downtown churches on prime property? They’d be at six figures.
If you’re saying that tax-exempts should pay taxes, of course they should. About a third of buildable city land area here is taken up by exempt property - religious, educational, governmental, etc. That was barely tolerable back before suburbs when the population was growing and dense. Today the population is down 40% and the city has been dying hideously for decades. Just like most other rust belt cities.
A tax-exemption for religious property is a governmental subsidy to religion. But the Supreme Court recently ruled yet again that mere ceremonial deism passes muster and that would cost no one anything to remove. Charging a trillion dollars in taxes on churches would foment a revolution. It will never happen.
What percentage of the value of your property is from the lot, though? For my house, it’s about 1/5 the total value, so I scaled my taxes down by 1/5, then multiplied by 5 since I live on a fifth of an acre, to get a 1-acre price.
It could be chipped away at. For example, by removing sewage service from the property tax, and charging everyone who’s hooked up (typically this is done via the water bill). Churches do not enjoy utility-exempt status. However, after that there would need to be a tax.
Quoth Exapno Mapcase:
My parish recently bought a building from another church, and nobody was able to find any precedents for it to figure out the price. Eventually, it came down to “How about a million?” “OK, I guess that sounds fine to us”. Which leads me to suspect that the figure came more from being a nice round number than from being an actual assessment. Fortunately, in our case, it wasn’t contentious at all: Circumstances were such that the sale was a win for both parties, which probably meant that a fairly wide range of values would have been acceptable to both. But I can easily see how it could have been contentious.
Hmm. Most churches have a full replacement value stated in their insurance policies, i.e., a flat amount the church collects if the building is a total loss. I assume this would be a good place to start.
And I do agree that property tax levies on churches are unthinkable in the US right now
Good point.
OTOH, that presumes that charitable religious people wouldn’t find a way to direct their contributions to other causes they favored.
If you can have charities for dogs and cats and baby seals I’m sure they can come up with something.
Donations to religious entities are a little over $100Bn per year. As the deduction effectively works at your marginal tax rate, the tax is therefore probably in the $25 - $30Bn range, plus state taxes. This, of course, is assuming people do not redirect their donations. Presumably those who tithe don’t have a whole lot of choice, but there may be some reduction in other religious donations.
They’ve done 800 since 1971 or about 20 a year. How many properties have sold in Detroit in 40 years? 800,000? More if that figure is for Detroit metro rather than Detroit proper. That’s not mentioning that Detroit and its extreme downsizing make it the worst case scenario among all American cities, a special case in almost every way.
In other places and times, I’ll stick with what I said earlier, that the selling of religious properties is ad hoc and often contentious. Anything that sells at the rate of 0.1% of other properties is essentially ad hoc, even if a specialized dealer has come into the market to ease the pain.
They are right a price on a church would not be fair, BUT what about just taxing the lot like it was a vacant lot? That would be fair. After all it uses city services like fire protection.
What happens if I own a building then RENT it to a church and it is clearly used as a church only with no business dealings? Do I now as owner not have property taxes? It’s a church, how can only it be taxed if I do still owe tax?
The first incorrect assumption is that this church doesn’t have any business dealings. They have at least one - a lease with you, the property owner. The church isn’t being taxed via property taxes - YOU are being taxed (since you’re not a church).
Munch, I see what you are saying but there are also leases between churches, often for smaller places they left, would those become business leases too? I know churches running business can be taxed for the business, but is that so if it is only worship, if so mine would be only for worship as well???
Another issue, if I pay prop tax as landlord, what if the church improves the property but only in religious ways, a big gold plated steeple, big clock tower, gold crosses on roof, big silver praying hands and statues of Jesus all around the property that they paid for, seems wrong I would see increased property tax for this religious only use. I see this could be complex issue.
I’d be ok with applying property tax to non-religious buildings owned by religious groups. Office buildings, restaurants, stores, parking ramps, houses…
The previous owner of my home was a church. It was the home of the pastor, but owned by the church. The residents used the streets, the parks, the schools and the emergancy services, but because it was owned by the church, they didn’t pay for those services.
This is true today, for all buildings that do not have a purpose that is directly related to an exempt activity.