Alaskan Town Considers Becoming First Town In America To Tax Its Churches

Nome, Alaska, is known – when it’s known at all – for being the finish line for the famous Iditarod dogsled race, but apparently there isn’t a lot of money in that. Like many cities across the country, Nome finds itself hard-pressed to make ends meet. After struggling yet again to come up with the money to pay for the town’s humble services, Finance Director Julie Liew proposed an idea that has so far seemed almost impossible in the United States: Why not tax the churches?

Surprisingly, the city’s officials couldn’t come up with a good objection and the proposal moved forward.

According to KNOM:

“You get rid of the sales tax exemption, most of the time these other exemptions aren’t given—we’re a very nice city [to do] it,” Council member Matt Culley said. “When we sit down at budget time, [with] the numbers to look at, if we want to donate that [money back to nonprofits], the money can go all back in … but we have control over it now, as opposed to it going whatever direction that we have it going now.” 

The “direction” they have it going now is that roughly $300,000 is left in the hands of churches and non-profits. It’s a lot of money being left behind for a city that is facing annual deficits and deep cuts to town services. The city is quick to point out that this new plan doesn’t mean that the money would be gone forever, if there is a surplus the money can go back to the organizations. Instead, it would be treated much like how the government treats income tax – collected up front and given back based on need and availability.

Should the ordinance pass, it would represent the first tax on churches of its kind in the United States. Traditionally, religious groups have gotten far-ranging leeway in regards to tax exemptions. So much in fact that a Washington Post investigation in 2013 found that taxpayers spend about $82.5 billion each year to make up for the free rides churches enjoy.

Cragun et al estimate the total subsidy at $71 billion. That’s almost certainly a lowball, as they didn’t estimate the cost of a number of subsidies, like local income and property tax exemptions, the sales tax exemption, and — most importantly — the charitable deduction for religious given. Their estimate that religious groups own $600 billion in property is also probably low, since it leaves out property besides actual churches, mosques, etc.

The charitable deduction for all groups cost about $39 billion this year, according to the CBO, and given that32 percent of those donations are to religious groups, getting rid of it just for them would raise about $12.5 billion. Add that in and you get a religious subsidy of about $83.5 billion.

Conceptually, the idea that churches should be exempt from paying taxes was in the notion that they represent a public good. They provide a spiritual service – and for many people a social one as well. Recently, the role of churches in society has shifted towards the for-profit and politically-motivated.

First, with the advent of the megachurch, the televangelist, and the “God wants you to be rich”-style preaching of pastors like Joel Osteen, the amount of money being earned tax-free by so-called religious organizations is dizzying. Osteen and his disciples have enriched themselves and their organizations and turned “God” into a brand as financially profitable as Apple or Nike. They earn millions of dollars a year, live in mansions and drive high-end Italian sports cars and they don’t pay taxes. This isn’t the era of a collection plate being passed around a modest congregation.

All of this: tax-free (image via KRNB)

Second, politics have crept onto the pulpit to the point where pastors are openly daring the U.S. government to stop them. Despite laws against it, churches frequently tell their flock who to vote for (and who not to vote for) and openly donate to political campaigns using money acquired by the church. Tax free money.

The government, typically through the IRS, is supposed to stop them, but hardly ever tries because attacking religious institutions – even when they are doing something illegal – is deeply unpopular. Churches exploit this public good will to further their rule-breaking.

It’s important to note that even with the new taxes churches and other nonprofits would enjoy many perks that aren’t given to other organizations. The city wouldn’t tax their property or income, simply place an ordinance that removes sales tax exemption. It’s a modest upgrade from “no taxes,” but a major first step to bringing some common sense to tax reform.