Image Credit: Sam Bowman

In the current economic crisis, both the states and the federal government are looking for any way they can increase their tax revenues. California is considering legalizing and taxing marijuana to alleviate its budget crunch. There are proposals to tax employee health benefits in order to fund health care reform. At some point, someone is going to have to come up with a trillion dollars or so to pay off the massive debt from the war in Iraq and the financial bailout/economic stimulus.

America would not be the first to eye the wealth accumulated by the church. In 1533, King Henry VIII of England split with the Catholic Church in Rome over Pope Clement VII’s refusal to annul his marriage to Catherine of Aragon. A few years later, with his treasury in decline, he turned his attention to the wealth and land of England’s monasteries. He ordered the Dissolution of the Monasteries and used the property to both replenish his coffers and as gifts to his nobles.

Although it is somewhat unlikely that Obama is going to pass anything similar in the near future, it is interesting to examine how much money the churches in America have.

Since churches are tax exempt both on income from donations and property values, it can be difficult to estimate values accurately. As a rough estimate:

“The State of Church Giving Through 1998″ tracked a composite group of 30 mainline Protestant and evangelical denominations with 29.3 million members representing 100,000 U.S. congregations out of a total 350,000 . . . The denominations received $17.2 billion in contributions in 1998 . . .
On average, churchgoers were giving just 2.52% of their after-tax income to churches in 1998 . . . a far cry from the biblical standard of giving a tithe–10%.

So if 100,000 out of 350,000 get $17.2 billion, then the total church income from donations can be estimated as $60 billion dollars a year.

Here’s another way. About 60 million people go to church every Sunday. Let’s say the average income is $30,000 (the average is slightly higher, but the mean is lower), or about $600 a week. If churchgoers give 2.5%, that’s $15 a week, times 60 million people times 52 weeks, which is about $47 billion from donations. These estimates aren’t precise, but they give similar figures. We can estimate church income from donations at around $50 billion a year. All of that is tax deductible to the givers, and tax free to the church.

Property values are even harder to estimate. Both the Catholic and the Mormon Church own large amounts of property. Estimates place the property values of church-owned land between $60 billion and $100 billion (there’s a good discussion of a variety of issues on church taxation here).

While a few billion dollars in extra taxes won’t do much on a federal level, it could certainly help on the state and local, where property taxes are often used to fund schools.

Here is where two difficulties arrive. Some churches have loads of money, while others are barely scraping by.

The success of megachurches may be masking attendance struggles in smaller congregations. According to the NCS, only 10 percent of American congregations have more than 350 regular participants, yet those congregations compose nearly half of those attending religious services in the United States . . . [Smaller churches] have declining numbers and rising costs—insurance rates, pastors’ salaries, utilities—making it really tough for many churches across America.”

Some churches are genuine inspirations to their community:

A lot of money goes for keeping the doors open,” said Jetty Fong, administrator at Evergreen Baptist Church of Los Angeles in Rosemead. But she said the 300-member congregation, with an annual budget of less than $1 million, still supports an orphanage in Japan, a hospital in Haiti and outreach efforts in Mexico and China.

Others grow rich from the contributions of their followers, and the tax breaks of the government:

Benny Hinn spends $112,000 per month on a personal jet, owns a $10 million, 7,000 sqft. home, and when traveling, gets hotel rooms for $10,800 per night.

Under current law, charities have to go through an application process to receive tax-exempt status. Their case can then be reviewed by the IRS to see if they continue to qualify.

Churches from established religions receive this status automatically. While some churches use their tax breaks to do good in their communities, others use their donations to build giant edifices on their un-taxed land.

Let’s conduct the following thought experiment. Suppose you want to start a club that meets once a week to discuss philosophy. We’ll call them the Thinkalotites. The group leader is a trained philosopher, and he gives weekly presentations on various topics, while encouraging the members to live morally.

Since everyone loves listening to philosophy lectures, the Thinkalotites grow in size. They have to buy a small building using donations and fund raisers in order to meet the growing size of their group. They still meet once a week, have a leader who gives lectures on living morally and other philosophical topics, but now they add in some basic rituals to keep things orderly in the larger group.

They write a book that contains all their treasured ideas, and try to distribute this work, at no profit to themselves, to as many people as possible.

This group can apply for tax exempt status under IRS provision 501(c), which provides tax-exempt status to any non-profit group “operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational purposes, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.”

While the Thinkalotites have to go through the process of applying for tax-exemption, churches receive this benefit automatically.

Every dollar that churches fail to pay in taxes is another dollar that governments have to take from everyday people to make up the difference. The only way to ensure fairness and eliminate abuse is to make churches apply for charitable tax-exempt status, just like any other organization. Those that are truly helping the poor should have the same benefits accorded to any other charity. Those who use their donations to worship only themselves should be taxed along with everyone else.