Under simple logic, churches and other nonprofit organizations are exempted from income taxes. Though it’s very true that such organizations are beneficial to the public in many ways, that’s not what truly justifies their exemption, as is often argued; it is their existence as non-profit entities that does. Taxation naturally applies to profit-makers, the generators of revenue upon which government depends. As Professor Dean Kelley pointed out in his book, Why Churches Should Not Be Taxed, “Other entities [such as churches], which are not in the wealth producing category to begin with, do not need to explain why they are not taxed any more than do the birds of the air or the rivers that flow to the sea.... [Taxation] would be pointless, since they are not in any meaningful sense producers of wealth.” It is the very nature of a nonprofit organization that makes it tax exempt in that it does not produce wealth like businesses or other taxed entities. So, it makes no practical sense to tax these organizations.
In fact, taxing such nonprofits discourages their existence and amounts to double taxation. First, all citizens, whether or not involved in a church or other nonprofit, are taxed on their individual incomes. As professor Kelley again pointed out, “To tax them again for participation in voluntary organizations from which they derive no monetary gain would be ‘double taxation’ indeed, and would effectively serve to discourage them from devoting time, money, and energy to organizations which contribute to the upbuilding of the fabric of democracy.” The only thing a tax exemption for a non-profit organization like a church does is to ensure that all the money an individual puts into a non-profit goes to the purposes he intends without being diverted by the government, which the individual already supports in his individual capacity.
Charles Eliot, former President of Harvard, said it best in testimony before the Committee on Taxation in 1906 when he stated, “The things that make it worthwhile to live…anywhere in the civilized world, are precisely the things which are not taxed.” Churches are one of the things that have made it worthwhile to live in the civilized world. Churches, throughout history, have improved American society and have acted as agents of positive societal change, in addition to their purpose of providing meaning for people’s lives and ministering to the local community. Even many federal court opinions, right up to the present day, have acknowledged this. To tax churches is to discourage the important work they do in society and to double-tax the individuals who support the church. This makes no practical sense.
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