Tuesday, November 27, 2012

Tax subsidies for churches

A while back I said I don't think we should let religious institutions not pay property taxes on their churches:

I don't see any reason a church/religion should get special exemption. I would be willing to keep the status quo if I thought that the exemption and threat of having it removed kept churches from advocating politics. I strongly suspect it doesn't. So I think a fair thing to do would be to officially let churches say what they want and force them to pay taxes like the rest of us.

The biggest deal here is the tax exemption, which allows churches to own huge pieces of lang at low prices while driving up prices for everyone else. The free speech issue here is really more a matter of theory because in practice this restriction isn't much of a burden. As a preacher or whatever, you can practically walk outside your church and onto the sidewalk and advocate whatever/whomever you want and their tax exemption would be fine.

Matt Yglesias confirms my suspicion that it's unfair:

State and local governments generally exempt churches (and mosques and synagogues, but realistically it's mostly churches) from property taxes. This not only costs revenue, but it leads to a substantial misallocation of real resources as scarce land is left unavailable for more productive uses. The ups and downs of urban growth have left many churches stranded in what are now core business districts that offer location amenities that would be extremely valuable to a commercial real estate developer but offer little concrete value in the religious sector.

More broadly, you have to consider the tax elasticity issues here not just in terms of inputs but of outputs. If church donations were subject to income taxes and church land were subject to property taxes, this would presumably lead to smaller and less architectually splended churches located in less-pricey areas and perhaps with lower-paid clergy. But would fewer souls be saved? Would an angry God blight are crops?

The answers are no and no. The flipside is that churches presumably would respond in part by providing marginally less in the way of social services. But the low elasticities are relevant here. The cost of those reduced church-provided social services has to be weighed against the cost of more dynamic economic growth, and more provision of state services and I don't think it remotely passes the test. Unless, that is, it does anger God and he visits his wrath upon us. But that's the real issue here. Does God care about the splendor of the churches built in his honor and is he prepared to offer us tangible rewards in exchange for subsidizing them? If so, it's a no-brainer. But if not it's an awfully wasteful policy.

I obviously don't care whether this would anger god. But even if you do, I think Matt's correct that it wouldn't. If it did, for some reason, anger god that some religions couldn't build huge, extravagant churches (like this one, which the pic doesn't do justice, it takes up a huge swath of land, much of it doesn't even get used) then I'd seriously question the merits in caring what that god thinks.

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