There is a lot of misinformation regarding the taxation of religious organizations. I assume most of it is unintentional and simply due to ignorance, but it must be addressed.
First off, religious institutions are not tax exempt. 501(c)(3) not profit charities are tax exempt. Many, but not all religious institutions qualify for that tax exempt status and do not have to pay taxes on revenue which is related to their charitable activities. They still have to pay taxes on other revenue, which means that not all revenue to religious institutions, even tax exempt ones, is untaxed. However, the common rhetoric by institutions like American Atheists and Atheist Republic are that churches are being subsidized by the government. It’s true that in some limited cases religious institutions receive some government funding. This is true for grants to church run food pantries, but again, they are grants towards running food pantries, not religious activities. The rest of what they call “subsidies” is really nothing more than religious institutions paying less in taxes.
A subsidy is payment to reduce the expense of something. Refusing to take a certain amount from someone or something is not a subsidy. They are a world apart. Without the outside institution giving a subsidy, the cost would be higher. Without the outside institution taxing, expenses would be lower. Furthermore, these anti-religious organizations often cite a very flawed study on the topic. “Research Report: How Secular Humanists (and Everyone Else) Subsidize Religion in the United States” by Ryan T. Cragun, Stephanie Yeager, and Desmond Vega shows either a complete lack of understanding of corporate finance and taxation or a complete disregard for it.
And yet this study is repeatedly cited as a way to attack religious institutions. As just one example of the flawed methodology, the study claims a $35B federal tax subsidy. Ignoring that tax breaks are not subsidies (otherwise every time you mark down a deduction on your tax return you would be getting a subsidy), the figure simply takes the total estimated revenue for the church and multiplies it by the top marginal tax rate. There are a few issues here. The study at least admits that it is assuming that using the top marginal tax bracket is reasonable, although it does little to justify that claim. Second, corporate taxes are graduated, just like personal income tax. Corporations do not pay the highest corporate tax rate multiplied by the total revenue. This brings us to the next flaw. Corporations are not taxed on revenue. They are taxed on profit. In other words, it would also be necessary to calculate how much of the revenue goes to payroll, resources for charitable activities, etc.
Finally, the study fails to take into account how a shift in taxation status of these institutions would impact contributions and charitable activities. Likely many religious institutions would cease to exist. That would mean a lot of new unemployed people who would have to either find new jobs in an already depressed job market or live off of welfare, thus defeating a lot of the purpose of eliminating the tax advantaged status.
Of course, the whole argument is a bit hypocritical, as American Atheists and many other institutions take advantage of the same tax breaks, falling into the 501(c)(3) non profit organization group. What these groups really want is to have religious organizations excluded from the exemptions, even though that would be discrimination based on religiosity.
Other arguments relating to this topic include claims that if religious organizations were taxed, it would have a significant impact on the government’s ability to function. In 2012, total government expenditures amounted to roughly $6T. Even if I were to accept the $100B tax loss calculation that the aforementioned study claims exists, that would account for roughly 2% of total government spending. Additionally, a good chunk of tax revenue goes to funding illegal wars and committing outright acts of terror. Perhaps before seeking additional ways to fund the government, Atheist Republic et. al. should be seeking to change how government spends the money it already has.