Tax Exemption Protects the Free Exercise of Religion

Churches are tax-exempt under the principle that there is no surer way to destroy the free exercise of religion than to tax it.  If the government is allowed to tax churches (or to condition a tax exemption on a church refraining from the free exercise of religion), the door is open for the government to censor and control churches and the free exercise of religion.  But that’s not just an opinion.  It’s the understanding of the U.S. Supreme Court.

In Walz v. Tax Commission, the high court stated that a tax exemption for churches “creates only a minimal and remote involvement between church and state and far less than taxation of churches. [An exemption] restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other.”  The Supreme Court also said that “the power to tax involves the power to destroy.”  Taxing churches breaks down the healthy separation of church and state and leads to the destruction of the free exercise of religion.  As the Massachusetts State Tax Commission put it in 1897, “The general exemption of houses of worship is a fit recognition by the State of the sanctity of religion.”

For those concerned about an appropriate separation between church and state, no better way exists to ensure it than to keep churches tax exempt.  If the government were to begin to tax churches, it necessarily asserts sovereignty, power, and control over churches.

An example of how the government can abuse its power against churches in this area is in the passage of the Johnson Amendment, which prohibits churches and other non-profits from directly or indirectly supporting or opposing political candidates for office.  A church’s tax exemption has been conditioned on obedience to this mandate since 1954 when Lyndon Johnson was instrumental in adding this prohibition to the tax code.  Scholars agree that the Johnson Amendment was a revenge piece of legislation directed at two non-profit foundations opposing Johnson for Senate.  Johnson did not target churches, yet for 55 years, churches have been prohibited from preaching about candidates for office.  The Johnson Amendment perpetuates a system requiring government agents to monitor and parse the words of a pastor’s sermon to determine whether that sermon violates the law and punishment should be meted out.  That system is an excessive and unreasonable government entanglement with religion.

In 1943, the Supreme Court stated, “If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in…religion, or other matters of opinion.”  The court didn’t add “...except when pastors address the subject of electoral candidates.”  Since 1954, the IRS and its petty officials have been able to prescribe for churches what is orthodox in matters of religion.  This is not religious freedom in any sense of that phrase.  Rather, this is religious orthodoxy mandated by the government, and it falls heaviest on those churches who believe their faith compels them to do what churches have done for centuries:  address the moral fitness of electoral candidates from the pulpit.

The Johnson Amendment provides a stark example of the power of the government to destroy the free exercise of religion.  The surest way to protect the free exercise of religion is to continue the healthy separation between church and state fostered by tax exemptions for churches.