Can the State Tax the Church?

Can the State Tax the Church?
Can the State Tax the Church?

The Holy Roman Catholic Church is the natural enemy of the secular left. Battles between these two forces have gone on for centuries—long before the term “secular left” came into common usage.

In those struggles, the left has employed every weapon it could find to use against the Church. All too often, they have succeeded because they attacked the Church in unexpected ways. One way to prepare for such attacks is to read about what the left is planning.

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One area of concern should be the taxation of the Church. To prepare for this attack, we must understand it, so that we will not be caught unaware of an eventual taxation trap.

The Power to Tax

For any serious student of American History, the name of John Marshall looms large. He was the Chief Justice of the U.S. Supreme Court from 1801 until 1835. His legacy is usually summed up in six cases. These cases set the tone for the relationships between the Supreme Court and the other branches of government, as well as the relationship between the states and the national government.

One of those six cases is McCullough v. Maryland (1819). Even though Chief Justice Marshall was not discussing the particular issue of taxing Churches, one key phrase of his opinion stands out: “The power to tax is the power to destroy.”

Justice Marshall understood that the government could end any form of activity by abusing its power to tax it.

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The Johnson Amendment

For 135 years, the official interpretation of the First Amendment to the Constitution, amplified by Marshall’s words, meant that no level of government could tax the Church. The Amendment specifically protected any religious activity (the “free exercise clause”), which made its taxation impermissible.

That state of things changed in 1954, with legislation known as the “Johnson Amendment.” Proposed by Senator Lyndon Johnson, it defines those entities that qualify for tax-exempt status:

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes… and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

The Amendment has two flaws. First, it treats the Church like any other non-religious charitable organization. Secondly, the wording of the Amendment is very broad.

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The Church does resemble other charitable agencies by engaging in charitable work that benefits the public at large. However, there are also profound differences between the Church and charities.

The Historical Relationship Between Church and State

The most obvious difference, at least legally, is that the Church’s existence is guaranteed explicitly by the Constitution. Other non-religious charitable organizations enjoy the right of free association, but only the Church and the press have Constitutional protection.

The second difference involves a misinterpretation of the fallacious idea of “separation of church and state.”1 This phrase is not found in the Constitution. It arises from a letter written by Thomas Jefferson. The general modern understanding misinterprets Jefferson’s intent and its context. He was assuring a group of Baptists that they need have no fear of the new national government. In other words, it was intended to protect religion from the power of the state.

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Over the last century, organizations like the American Civil Liberties Union and the Freedom From Religion Foundation have successfully promoted the fallacy that this separation is intended to protect the state from the influence of religion. Therefore, the Johnson Amendment is a mistake based upon an error.

This error is very powerful. Whenever the subject of the relationship between religion and the state comes up, the phrase is repeated but seldom refuted.

The Unique Nature of the Church

The third difference is the most difficult to understand, but perhaps the most important. Unlike any other organization, the Church does not depend upon the government for its existence. All of the other “corporations” mentioned in the Johnson Amendment exist because they have been given a charter by the U.S. government or one of the states. The Church does not. She existed 1700 years before the United States came to be, and will survive until the end of time.

In his book, Return to Order, author John Horvat spelled out this relationship:

“We must first understand that the Church and the State are both independent perfect societies with specific ends and goals. Each is juridically competent to provide all the necessary and sufficient means to carry out its purpose; each is sovereign in its own sphere.”

Please note that in this context, the word “perfect” is taken in the sociological context. Thus, a perfect society does not need the help of any other organization to fulfill its function. Mr. Horvat continues:

“It is this universal Church that insists upon Her role in society to promote the worship of God and teach the moral law and dogmas necessary for sanctification. …[T]he Church clearly recognizes as proper to the temporal sphere an enormous range of activities and customs…. Among these are the functions of government, the juridical order, the common defense, the mechanics of economy, and the general welfare of the nation.… Yet in moral matters where sin is involved, the Church affirms Her right to intervene in temporal affairs.”

The Johnson Amendment’s Implications for the Pro-Life Movement

Probably the most obvious example of the State and the Church claiming overlapping jurisdictions concerns the right to life.

The Church’s efforts to fight against the evil of abortion have been limited by the way that some Church leaders interpret the Johnson Amendment. The faithful have directed many appeals to the Church’s hierarchy to act against those who publically support abortion while claiming to be Catholic. The hierarchy has been reluctant to do so. The fear of taxation is one reason for this reticence.

This fear is very real. Over many generations, the generosity of faithful Catholics has provided the Church with beautiful and expensive buildings. If the Church were to pay property taxes on them, many parishes might not be able to bear the financial strain. Such taxation could force congregations to be disbanded as their parish churches are shuttered.

Many dioceses control investment portfolios containing many millions of dollars. This interest accruing from those investments is used to finance many charitable programs. If those dividends were taxed, the ability of the Church to meet real human needs would be drastically undercut.

However, this threat must not determine the Church’s moral policies. The Church’s mission is to proclaim the truth regardless of its material consequences.

The Left’s Desire to Use Taxation as a Weapon

The use of the tax weapon is now coming to the forefront. Leftist are now proposing ever more radical goals that enshrine abortion and other immoral practices. The left is also becoming bolder in trying to force this agenda upon the faithful. The fact that the Obama Administration had the temerity to insist that The Little Sisters of the Poor pay for their employees’ contraceptives is a sign of this increasingly radical agenda.

The left will likely seek to use taxation as a weapon against the Church—citing dogmatic positions against abortion, contraceptives and homosexual “marriage” as transgressions against “settled public policy.”

The second flaw in the Johnson Amendment, its broad language, could become an instrument to harm the Church. When the Amendment was passed, no one thought it might be used in this manner.

The Dangers of a Vaguely Written Law

The broad wording means that its specifics are decided by a small group of nameless and unelected bureaucrats at the Internal Revenue Service. If the IRS concludes that the Church’s opposition to homosexual “marriage” is, in and of itself, a campaign against a political candidate who favors such laws, it could revoke the Church’s tax-exempt status.

Such government action is a genuine possibility. It only awaits a sufficiently leftist president and a compliant Internal Revenue Commissioner. The last book written by Phyllis Schlafly, No Higher Power, documents how far down that road the nation has already traveled.

“The policies of the Obama administration represent the greatest government-directed assault on religious freedom in American History.… Through stealth and sophistry, he is gradually transforming America into a secularist and socialist dystopia along modern Western European lines.”

Defenders of Holy Mother Church must awaken to this danger. The left has been talking amongst themselves about taxing the Church for years. Far too many Catholics are complacent. The times are such that we need to join the conversation before it is too late. We cannot afford—either in moral or economic terms—to lose the battle over taxation of the Church.

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1. The idea, summed up in the words, “The Church ought to be separated from the State, and the State from the Church” was declared erroneous by Blessed Pope Pius IX in his allocution “Acerbissimum,” Sept. 27, 1852. It is restated in #55 of the Syllabus of Errors.

Last Updated: March 14, 2019