In Italy, the Catholic Church enjoys a tax exemption on two-thirds of its 100,000 properties; that is, until today. The new prime minister, who has been in office for only 4 months, has decided to go through with a plan to remove the churches’ tax-exempt status on many of the properties in question, specifically those which merge commercial interests with ministry. An investigatory committe found in January that there would be an estimated gain of $130 million dollars (100 million euro), that would could be gained from assessing taxes on all church property. And I for one think that we here in the states could take a hint from the folks who created Catholicism.
Freedom of Religion (From Oversight)
Churches here in the US enjoy oversight-free status in numerous areas that most non-profit organizations do not enjoy, and often engage in business and commercial enterprise using methods that would be illegal under other circumstances. Many churches enjoy tax-free retail establishments such as coffee shops or bookstores (which are somewhat under fire), which compete directly with other businesses.
In Michigan, the problem of direct competition showed itself when a Catholic retirement community came under fire for attempting to file for property-tax exemption on its units, while a neighboring community’s residents pay $2300 per unit in taxes per year. The eventual outcome of the dispute was the loss of tax-exempt status, but the issue highlights the entitlement that church organizations feel in their exemptions.
The true nature of nationwide church enterprise is unknown, since religious institutions do not need to file IRS reports that detail the origins or destinations of their income. All other non-profit organizations must file with the IRS to ensure their status, but religious institutions are also exempt.
In many states, religious institutions are absolved from many consequences of the law that would normally protect groups from harm or discrimination. In Alabama, the normal safety requirements for child daycare services are suspended for religious organizations. Meanwhile, the recent court case of Cheryl Perich, a school teacher who was dismissed after suffering from narcolepsy for a term. The supreme court ruled in the church-run school, citing the ministerial exception, which is designed to allow churches to dismiss ministers who disagree with the church theologically. In this case, however, the law allows for discrimination, racism, and dismissal based on medical grounds.
The parsonage allowance extended to all religious clergy who receive a salary from a church is another area of contention, that non-profit workers do not experience in the least: It allows a pastor to receive tax exemption on the rental, property, and utility cost of a home. Thanks to the efforts of megachurch pastor and author Rick Warren, a 2002 bill capped the parsonage allowance at the “fair rental value” of the home, who in 2000 was brought to court over his own parsonage allowance. This new law set the precedent for years to come.
The parsonage allowance, unlike in the case of the United States Military, has no cap. This means that megachurch pastors such as Joyce Meyer or Joel Osteen (who earn hundreds of thousands of dollars per year) can claim the parsonage exemption on their million-dollar mansions. Meyer’s ministry check pays for the utilities, maintenance, landscaping, pool upkeep, and even the insurance, all tax-free under the current law.
In 2007, senator Charles Grassley assessed some of the largest megachurches in the nation, and found tremendous earnings posted by the pastors. Many of the pastors preach the so-called “prosperity gospel,” which promises earthly wealth from God in response to hefty donations.
The result is an incredibly skewed salary for pastors at megachurches. A study in 2010 found the average salary to be $147,000, with salaries going as high as $400k per year, plus medical, dental, and life insurance, and often included cell phone, retirement, and long term disability insurance, all of which are tax-free. Many of the ministries investigated by Sen. Grassley’s owned private jets, lake homes, and other amenities afforded to the staff by the tax-free donation of its congregants.
Even small churches see incredible benefit from some of these privileges; Churches pay no property tax, even on prime real-estate. Historic churches in vibrant downtown areas pay only rent, which prevents businesses and offices from engaging in these areas. There is also the very real problem of fraud, in which the review process to become a religious institution (along with the exemptions) becomes lucrative from a business standpoint.
Furthermore, because the government has no say in how churches operate, churches are required by law to not interfere with government matters. This, however, is a pipe-dream fairytale. Church-funded lobbying groups such as the American Family Association use tax-free donation funds to fuel a political agenda. Candidates are often endorsed directly from the pulpit, which is a violation of the auspices of tax exemption that churches enjoy.
Despite some actions being taken to alleviate and investigate the problem, there is not enough manpower available to the government to investigate every church every week, and religion has continually shown itself to want to edge as close as possible to the limits of the law, or even knowingly break it.
Time to Take Hints from Europe
Italy’s pressure on the catholic church is unprecedented in Europe, where Catholicism rarely receives monetary scrutiny (though it has seen a decline in respect through recent scandals). However, in France, religions have come under intense fire in recent years. It recently declared Scientology a fraudulent cult, and assessed the church nearly $800,000 in fines for “targeting vulnerable people for commercial gain,” contrasted by the US position on Scientology, which recognizes it as a legitimate religion.
There is no way to know just how much we would gain from removing the privileged status that religion enjoys in our nation; there may be up to $100 billion available in property taxes alone, but this is simply an estimate. However, when we are facing an unbalanced budget that is trillions in debt, we should take a hint from Italy, and explore all the options we have. I, for one, am all about exploring our options.
EDIT: I erroneously stated that pastors pay no income tax. This is not true; They may either pay income tax as an employee or self-employed, with deduction for parsonage. However, if any salary goes unreported to the government (such as with waiters and waitresses), the pastors pay no income tax on these funds.