Religious Tax Breaks Cost America $71 Billion a Year
University of Tampa professor Ryan T. Cragun, with a little help from his students, has attempted to calculate how much religious tax exemptions cost America each year, and the figure is a staggering $71 billion.
The impetus behind calculating this figure came when professor Cragun was asked how much mansion-owning Reverend Randy White paid in taxes on his income. There was no readily available answer, and this got Cragun and his students thinking about what tax rules apply, the annual cost to America on those grounds and, as an adjunct, whether churches truly meet the criteria for such “charitable” tax donations.
A breakdown of how the professor and his colleagues arrived at this total, including the assumptions they had to make, is published in the latest issue of Free Inquiry. However, here’s an overview of what comprises the $71 billion figure:
- Federal income tax subsidy: $35.3 billion
- State income tax subsidy: $6.1 billion
- Property tax subsidy: $26.2 billion
- Investment tax subsidy: $41 million
- Parsonage subsidy: $1.2 billion
- Faith-Based Initiatives subsidy: $2.2 billion
This figure excludes a number of things, including volunteer labor subsidy, donor tax-exemption subsidies, and local income and property tax subsidies, among several others. This is because they are too difficult to calculate due to a number of variables. This means that the total figure is likely to be quite conservative.
This is what the authors had to say about these figures:
To put this into perspective, the combined total of government subsidies to agriculture in the United States in 2009 was estimated to be $180.8 billion. Religions receive at least 40 percent of the subsidy that agriculture does in the United States. Another way to illustrate the size of the subsidy may be to illustrate how much tax revenue would increase at the state level if religious institutions had to pay property taxes. In Florida, where the state government’s budget was $69.1 billion in 2011, the amount of tax revenue lost from subsidizing religious property was $2.2 billion or 3 percent of the state budget. The additional revenue would have mostly prevented the $1.1 billion cut to firefighter and police retirement plans and the $1.3 billion cut to public schools.
Other highlights include that individual states are propping up religious institutions by not requiring them to pay property tax:
States subsidize religions to the tune of about $26.2 billion per year by not requiring religious institutions to pay property taxes for property worth about $600 billion. 25 This subsidy is of particular interest because property taxes pay for services such as firefighting and police, which religious institutions use the same as corporations and private citizens.
Also, that religious institutions, due to auditing restrictions, provide an ideal vehicle for money laundering:
However, religions are highly unlikely to be audited because Congress has imposed special limitations on when churches can be audited.14
What this means is that donations to religions are largely unregulated. In our discussions while investigating the subsidies to religion, we realized that religions would be the ideal way to launder money if you were engaged in an illegal enterprise. Hypothetically, the leader of a drug cartel could have one of his lieutenants start a church and file for tax-exempt status.15 Once granted, money from the sale of drugs could then be donated to the religion, which could use the funds to build extravagant buildings (including a “parsonage”), host extravagant “services” (a.k.a. parties) for members of the religion, and pay extravagant salaries to its ministers (including the leader of the cartel). Drug money could be laundered through the church’s bank accounts with little risk of being caught by authorities. If drug cartels and the Mafia aren’t already doing this, we’d be surprised.
The study’s authors note it is unlikely that these tax exemptions will be repealed any time soon but, at the very least, the study points out the massive chunk of money that is being used to prop up religious institutions when those institutions have failed to demonstrate an equivalent level of actual charity work but continue to involve themselves in politics to a degree that should rule them out of tax exempt status.