The Corner

Religion

Taxing Churches Is a Terrible Idea

Beto O’Rourke, the former Texas House member and Democratic presidential candidate, was asked last week whether religious organizations that oppose same-sex marriage should lose their tax-exempt status. He thinks they should. This is a terrible idea.

The tax deduction for charitable contributions offer significant support to houses of worship. If you’re in the top tax bracket, the true cost of a $100 gift to your church is only $63, since you don’t have to pay the 37 percent tax rate on the $100 of income you are giving away. This leads to more charitable giving than there would otherwise be.

It’s hard to say what would happen to the total amount of charitable contributions if Mr. O’Rourke has his way. But I discuss some evidence in my latest Bloomberg column.

Forthcoming research by economists and charitable-giving experts Jonathan Meer and Benjamin Priday finds that a 10% increase in the “price of giving” reduces philanthropy by a little over 10%. (The price of giving changes when Congress changes marginal income tax rates.) For households in the top tax bracket, eliminating the deduction entirely for religious organizations that oppose same-sex marriage — as O’Rourke says he would attempt to do if elected president — would increase the taxpayers’ cost of giving to those groups by 59%. This would cause their charitable contributions to plummet.

Why else to be opposed to O’Rourke’s idea? Income given freely away should not be taxed. Churches, mosques, and synagogues are tax exempt because many of the services they offer are complimentary to government programs. The American tradition of turning not only to government for the provision of social services. And:

When the U.S.’s social ecology is healthy, religious organizations and the government enjoy a wide distance. O’Rourke’s plan would have the state put the church under a microscope, inspecting its theology and rituals to ensure that they support same-sex marriage, doling out tax breaks to some and not to others.

He would keep the tax exemptions for those churches, mosques and synagogues that subscribe to his preferred theology. Those that don’t would be required to provide financial support to the government.

Check out my column for my full argument. Your comments, as always, are very welcome.

Michael R. Strain — Michael R. Strain is the director of economic-policy studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.  

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