Research

Project
Nicholas Alcalde

Issues with Church

Taxation
Abstract:
In this paper I will be examining the complicated issue of church
taxation. Under current laws, churches are exempt from paying any property
or income taxes at the state or federal level. Its an issue that requires a
more in depth interpretation of the current laws. I will explain the arguments
being made by each side followed by support for my argument to tax certain
churches. I will also offer a suggested solution that I believe is a fair middle
ground.

Introduction:

Proponents argue that churches receiving tax exemptions keeps the

government out of church finances thus upholding the 1st amendment law of
separation of church and state. However, opponents argue that giving
churches these special tax exemptions violates this very law, claiming that
they are a privilege and not a constitutional right. This dual interpretation of
the law is what makes this issue so hard to resolve, since it rarely gets past
this discussion that hasnt been given an answer yet. Despite the ethics
involved in taxing churches, I believe that the economic incentive alone is
enough the justify taxing a select group of churches. This select group of
churches I will be targeting are referred to as megachurches.

Methods:
The data and information I used for this paper came from 3 different
sources
Peer-Reviewed Article- I got a very in depth historical outline of this issue
from a scholarly article written by James E Wood. Not only did it give
information about the foundation of this issue and ways its been dealt with
in the past, it also gave very useful insight on the recent developments with
this issue and what effects some possible solutions would have.
CNN Article- Another source I pulled information from was an article from
CNN.com titled Megachurches Mean Big Business. This was the article that
led me to choose this topic and gave the most revealing and unsettling
information about some of the largest and most profitable churches in the

country. In this paper I will address the issues with these churches and why
they call for a look into outdated laws.
Website- The final and probably most helpful source I got information from
was a website called procon.org that laid out all the arguments both for and
against church taxation. It is clearly an unbiased site as it attacks and
defends both sides on just about every concern that has been brought up on
the subject.

Why should some churches be taxed?

When it comes to taxing churches there are lots of arguments being
made but the strongest one is that exemption from taxes is a privilege, not a
right. This privilege was originally granted to churches because of the
contributions they were making in the community in charitable services,
however there is no such provision in the constitution for this to remain the
norm. William Douglas, an associate justice of the US Supreme Court, stated
that "If believers are entitled to public financial support, so are nonbelievers.
A believer and nonbeliever under the present law are treated differently
because of the articles of their faith I conclude that this tax exemption is
unconstitutional." Churches also claim that their charitable work grants them

the right to these exemptions, but secular charities are forced to report
income to the IRS before receiving tax exemption while churches are
automatically granted exemption without having to file a tax return. As Mark
Twain argued no church property is taxed and so the infidel and the atheist
and the man without religion are taxed to make up the deficit in the public
income thus caused."

Why should all churches remain tax free?

Despite all these claims that their exemption is a privilege and not a
right, the churches stick to the argument that if the government were to tax
them, it would be a violation of the separation of church and state. This puts
lawmakers in a difficult position because there has been little and
insignificant interpretation from the Supreme Court on this matter. Many
churches are already struggling to survive as is, and a new tax burden would
almost certainly get rid of many small churches. The vast majority of
churches also refrain from getting involved with political issues, which they
claim should protect them from government intervention.

Megachurches
As stated above, some churches are quite small and are barely
bringing in enough money to stay standing. And then there are

megachurches. These establishments accommodate up to 15000 members

and are most common among the evangelical Christian faith. These churches
average about 6.5 million dollars in income per year, and if you combine all
these churches throughout the US thats easily over a billion dollars in profit.
While churches of this size are few and far between, they are clearly taking
advantage of their privilege to not have to pay taxes. Not only are these
churches making money from dues required by their members, they are also
selling self-help books, CDs and DVDs that their own pastors are putting out.
This is all untouchable income that is hiding behind an outdated law.

Possible Solution
I can understand why both sides make such arguments for their
stance, but it is still clear that this law cannot continue to stand as it does
today. If nothing changes then megachurches will continue to profit off the
unworthy exemptions that were mainly intended for small and struggling
churches that arent clearly trying to make a profit. Thats why I think a
plausible solution would be to only tax select churches. If state and federal
government were only to tax churches with incomes in the top 10 percent it
would not only discourage exploitation but also bring in some much needed
funding that could perhaps be redistributed to the smaller and more needy
churches, among other things.

Conclusion

Even though this is probably not an issue with most churches, the
current exemptions that all churches are receiving need to be reexamined. It
is clear that larger churches are exploiting and reaping the profits of such
outdated provisions while using smaller churches as reason to justify their
actions. If this privilege isnt removed from those that do not deserve it then
they will continue to maximize their profits and bask in their undeserved
special treatment.

Annotated Bibliography
"Mega Churches Mean Big Business." CNN.com. N.p., 21 Jan. 2010. Web. 19
Mar. 2015.

-This was a very revealing article that quite honestly convinced me to

research and write about this topic. The article is relatively short but points
out a lot of troubling statistics when it comes to church profits. As can be told
from the title, it is only talking about these massive churches with tens of
thousands of members that are bringing in such profits. It not only describes
how they are making so much in profits, but also what they are doing with
those profits. They are clearly few and far between, but the fact that they are
able to profit off of entitlements that smaller churches require to continue
running is something that needs to be exposed and changed.
"Should Churches Remain Tax-Exempt." ProCon.org. N.p., 9 Feb. 2013. Web.
19 Mar. 2015.

-This website was especially helpful for my research because it

mapped out all of the different arguments coming from each side.
Instead of just listing them, it gave an explanation for what each
argument meant and why the perspective side was trying to make that
argument. This made the issue itself much easier to understand in
addition to helping me explain why I was choosing to argue over such
topics. It also gave a lot of background information that helps the
reader understand the origins of this age old debate and why it is such
a challenge to come up with a fair resolution.
Woods, James E. "Tax Exemption of Religion and the Separation of Church and
State." Review & Expositor 83.2 (1986): n. pag. Web. 19 Mar. 2015.

-This scholarly article written by James E. Woods was published

almost 30 years ago but still gave me plenty of reliable information to

back up my claims with. This source proved most useful to me because
it was the only peer reviewed published article that I used for my
research. It gave a much more in depth background on my topic issue
and the issues with reform. It also discussed past Supreme Court
interpretations and rulings of the church tax exemption law, which was
some of the most important information on my topic. With all of the
information in this article I was able to form and back up my
arguments.