The furor over a mosque in Manhattan has swirled around issues of personal freedom and collective tolerance. But very little of the discussion has focused on the pros and cons of construction of places of worship in our cities and suburbs, or on their tax status. In a country that displays high rates of worship and has a growing population, it’s to be expected that religious spaces would be on the increase. Yet, like all things that are added to the built environment, churches, synagogues, temples and even meeting halls can have a negative impact on those who live in the area. Economists term this a ‘negative externality’.
Parks are a simple analogy, in that it is nice to have somewhere to walk your dog if you live nearby, but it is not so pleasant if dogs are shipped in by their owners from other neighborhoods to use the space, especially if they have little incentive to clean up after themselves [that would be the owners, not the pets]. Places of worship are the same, insofar as it might be convenient to have a temple next door, but only if it is for a compatible religion. If not, it is just another source of traffic and noise for the neighborhood, and if it is a religion that is presently controversial, then there is even more likelihood of unhappiness.
One of the reasons that so many congregations can afford to build new spaces for themselves is that religious enterprises are not taxed. A glance at the chat rooms across the Internet suggests that this is a warm-button topic — not of major importance, but ready to become so at a moment’s notice. Those who patrol these issues have developed a rather neat logic for this tax exemption, namely, that payment of income or property taxes by religious institutions would violate the separation of church and state. Indeed, the Supreme Court seems to have fostered this logic, arguing in 1970 in Walz vs. Tax Commission of the City of New York, that a tax exemption for churches “restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other”.
Logically then, payment of taxes by religious groups should indeed be considered unconstitutional. But what if we were to separate the payment of taxes on income from the payment of property taxes? It’s reasonable enough to argue that the former should be exempt, especially if you are comfortable with the reality that plenty of corporations and many affluent individuals pay little or nothing in income tax.
However, the non-payment of property taxes is quite different, as it has a large impact on the way in which cities operate. Religious enterprises can afford to outbid their competitors when purchasing land as they buy at a discount, namely, the dollars saved on non-payment of property taxes. Put another way, they can afford to purchase marginally larger properties, as they are able to fold the putative taxes into their bids for land.
Congregations can often afford to buy prime locations at urban intersections; in the suburbs, they can afford to buy larger lots and build mega-churches with vast parking lots. The scale of these developments can be remarkable. A new LDS temple that is planned for Gilbert, Arizona will cater to tens of thousands of worshipers on a 21 acre site.
Now, I would rather that the urban fabric be maintained than be left idle, especially at present, while the construction industry is in poor shape. It makes little sense, though, to encourage market distortions. Churches can break up the land-use in a city, inserting a structure that is used intermittently among, say, office spaces for which there can be high demand. Building any kind of religious structure in Manhattan, where land can fetch $100 million per acre, serves to drive up the costs of real estate yet further. In the suburbs and exurbs, where land is of course infinitely cheaper, the distortion is less, but the impacts are potentially higher. Vast mega-churches have all the impact of a Wal-Mart but none of the tax benefits, and of course none of the jobs.
How much are we talking here in hard cash? My simplistic calculations and equally non-rigorous research suggest that there are approximately 350,000 religious spaces in the US. If we assume that each occupies 10,000 square feet [and many are five to ten times larger], then that would be approximately 80,000 acres of land on which taxes are not being paid. Clearly, few of those acres are as expensive as those in Manhattan, but even in suburban Phoenix, raw land reached $300,000 per acre before the 2008 correction. My arithmetic suggests that $20 billion of land is being used without tax payment, which would amount to tens of millions annually.
Places of worship are in general highly inefficient uses of space if you simply take into account the number of hours per week they are used. This notwithstanding, they place a burden on the public purse in terms of water and sewerage links, road maintenance, and fire and police protection—the fact that they are unoccupied may actually increase the cost of surveillance. These services, plus the opportunity costs of lost taxes, come at a moment when nearly all municipalities and most States are looking for ways to replace contracting revenues. Law professor Evelyn Brody has done a fabulous job in documenting the ways in which non-payment is hurting the public sector, and the innovative ways in which some jurisdictions are using PILOTS (payments in lieu of taxes) to make up the losses.
As we know, religion is a touchy subject. Asking congregations to pay their property taxes will be taken by many as an assault on religious freedom. But if we also look at the larger class of charitable and non-profit organizations, we find many small charities that could not and thus should not pay property taxes. Small churches, mosques and temples would be in this category. But there are also non-profit organizations that are wealthy; Harvard University should pay millions of dollars on its holdings in Boston, and the same is true of large, wealthy religious organizations with land holdings throughout the country’s urban areas.
Why single out what many regard as ‘the good guys’? The answer is that welfare subsidies distort the market, wherever and whenever they occur. That’s true of mega-churches, and it’s equally true of new shopping malls that receive tax incentives to locate in one jurisdiction rather than another. Taxes are of course anathema to many in our society, but then so is welfare. So let’s be consistent and get rid of property tax subsidies for developers and large charities, regardless. If that includes large churches, then so be it. The new revenues will be a boon for municipalities, so that they can provide services for those who need them most. Some organizations will claim they cannot pay, but even there the news is not bad: There is evidence that when land-uses change, redevelopment can have a multiplier effect. This was true of plenty of military sites, and it has been documented for churches being re-purposed in inner city redevelopment areas.
In its 1970 decision, the Supreme Court observed that “the power to tax involves the power to destroy.” Yet it is also the case that the power to provide exemptions is a powerful distortion of the ways that cities organize themselves as efficient providers of goods and services. To the extent that we can have a sensible discussion of religion or taxation, let’s explore just which interests are served by subsiding worship.
Photo by rauchdickson of Solid Rock megachurch, Monroe, Ohio
Andrew Kirby is an urbanist based in Phoenix. For several years he lived next door to the 12th century church in Cholsey in the UK, where Agatha Christie is buried.
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Comments
32 responses to “Religious Freedom or A Tax-Free Ride?”
Yes – having churches pay property tax seems like the right way to equalize what is going on without threatening the tax writeoff benefits.
Just a nitpick – you say “new LDS temple that is planned for Gilbert, Arizona will cater to tens of thousands of worshipers on a 21 acre site.” I assure you, the LDS Church wishes they could get 10k worshipers to the temple. Maybe in a week, but certainly not in a single day and not for any one meeting (like a megachurch).
That said, property taxes should be paid by all – if they can afford to buy the property and keep the lights on, they they can afford to pay the corresponding property taxes.
Andrew, do you really believe that, unless the building built in your neighborhood is for a “compatible religion,” there are no benefits to you and you are only impacted negatively, by increased traffic and noise? Ouch. That seems awfully harsh.
Architecture lovers should also fear taxation of churches. Buildings like the old church on the Circle in Indianapolis would be done for, swallowed up by market forces. That church sits on the most expensive lot in town; there is probably no way the congregation could afford market rate on the taxes. I don’t belong to that congregation, but I derive spiritual benefit from that sacred place every time I walk past it. Old churches on prime lots would be doomed.
The discussion can’t just be about buildings, though, or hours used, and acres occupied, but what the people inside the buildings do.
Sure, the state and private industry have taken over some of what used to fall squarely within the responsibility of religion, such as caring for the sick, feeble, and poor and educating children, but that has not reduced “incompatible religions” to mere nuisances. Come on. What about the hope religion inspires in people? The honesty? The work ethic? The sense of responsibility to care for a spouse and children? The respect for law, order, and peace? The neighborliness and devotion to community? What is the value of those traits in taxable dollars to you? And those are the intangibles; the tangibles are still there: religion still does a very large share of educating and caring for the sick, feeble, and poor. It does this without demanding taxes to pull it off, I’ll add. These are the services mostly likely to suffer by taxing religion. And for what? So you can have a “boon for municipalities, so they can provide services to those who need them most.” What? Are you seeing the issue here, Andrew?
Constitution aside, the state has a very strong interest in encouraging religious faith.
I’m not saying all religious people have all the traits I listed above, or that nonreligious people have none. Of course not. But multiply the millions of religious people by the traits and charitable acts those people have developed because of their religious faith, and your product will be massive tax savings (and quality of life increases) to you. Subtract from that the services that would be lost so that you can have your chemeric “boon no municipalities” and society will be much the poorer (literally and figuratively). That is, if you care about doing such silly calculus.
Within walking distance of my suburban home is a Jewish congregation, a Mormon church, a Greek Orthodox church and soon a Lutheran church. I benefit from the presence of these buildings and the people who worship in them in ways too numerous to quantify. May they all thrive perpetually in tax-free bliss in the greatest pluralistic nation on earth. To the extent my city is ‘distorting the market’ by encouraging religion to prosper, may the distortion march on!
The practical result of taxing religiously-owned property would be to push religion even further to the exurbs where land and taxes are cheaper. The religious would follow (if they haven’t already), leaving urban areas even more even starved for religion than they are now – a likely contributor to many urban problems. Of course, in your odd world only religions that “could afford it” would be taxed and thus be pushed out of cities. So inner-city folks would still have the option of attending the smaller and poorer congregation.
Finally, to break down and say, okay, the religions that can’t afford it shouldn’t have to pay the taxes is totally perplexing. How arbitrary. It reveals and ideological prejudice that “any entity that ‘can’t afford’ taxes shouldn’t have to pay them.” How you are going to determine what NOT FOR PROFIT is most profitable is going to be interesting.
(Side note: I encourage every city to adopt a zoning code the prohibits large statues of deity emerging from lakes.)
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