Special status for religious groups creates unfair tax system

In Italy on Wednesday, Prime Minister Mario Monti announced his plan to amend Italian law to allow taxation of the Italian Church. Like the United States, Italy has been facing a recession for some time now and has been examining all the options to make up for the shortfall. An investigatory committee found a gain of €100 million ($130 million) by adding only a property tax on all church commercial property. A similar move in the U.S. could place much-needed funds back into our government budget.


Right now, churches, clergymen and their relatives benefit immensely from laws that place them outside the reach of normal nonprofit organizations in a variety of ways. The most forward and simple inequality that should be taken into consideration is to remove or cap the parsonage allowance. Today, every cent that an ordained clergy member receives from the Church for his or her home is tax-exempt, including insurance, property tax, utilities, mortgage and even the interest on the mortgage. The U.S. military provides a tax-free housing allowance up to a certain point, beyond which taxation is fair game.

This exemption does not exist for workers of standard nonprofit organizations, who must pay normal federal taxes on these properties. These exemptions often exceed millions of dollars; Ed Young Jr., the CEO of Fellowship Church in Grapevine, Texas, resides in a 10,000 square foot home valued at $1.5 million and oversees a $53 million dollar annual tax-free budget.

Pastors, while paying no income tax, may also opt out of Social Security and Medicare taxation as well. A 2010 study found that the average megachurch pastor’s salary was $147,000, going as high as $400,000 — all tax-free. Taxing religious employees, who work just like any other American, would provide a significant increase in the internal revenue.

Churches are automatically exempt from filing financial statements about the income they receive or distribute and pay no property tax on any property holdings they may have. And these tax exemptions are not just for mainline religions; in October 1993, the Church of Scientology received tax exemption as a religion in the U.S.; their “clergy” receive the same benefits as a small-town church. The U.S.’s position is somewhat contrasted with France’s, which recently declared Scientology a fraudulent cult and has begun assessing fines for “targeting vulnerable people for commercial gain.”

By enforcing taxes on the industry that is organized religion, our country could gain significant sums of money, estimated in the billions of dollars, by simply treating all our citizens with equality. Religion has become a lucrative industry, a far cry from the modesty of pastors of the past. In light of changing times, the billions of tax-free dollars that religion freely enjoys should be reexamined. When pastors travel in private jets to their million-dollar, tax-free mansions, it is time to reevaluate the tax-free status of churches.

Italy - Prime Minister Mario Monti plans an amendment to an Italian law that will force the Catholic Church to pay taxes on all its commercial properties, according to a statement posted late yesterday on the government’s website.

The church currently pays property tax only on buildings designated as “purely commercial,” based on an Italian law originating 20 years ago and extended in 2006. The wording is ambiguous when it comes to clinics that have a chapel or monasteries that offer bed and breakfast accommodation.

The Catholic Church owns about 100,000 properties in Italy, a third of which are commercial, according to the Italian Radical Party, which historically has challenged the church.

Italy would gain an additional 100 million euros ($130 million) from increasing levies on the church to include all its commercial property, Paolo Berdini, an urban planner and consultant for local administrations, said in an interview last month.

The Vatican reported a profit of 9.8 million euros ($12.7 million) in 2010 after three years of losses during the recession.

EU Probe

Following a complaint by the Radical Party, European Union regulators opened a probe in 2010 into Italian tax breaks on real estate granted to the Catholic Church, saying they may distort competition.

The outcome of the investigation will be made public by next month and if the decision goes against Italy, the EU could order the country to pay a fine and to demand that the church reimburse the government for unpaid taxes of the last five years, the secretary of the Radical Party, Mario Staderini, said in an interview in Rome on Dec. 21.

Monti has informed European Union Competition Commissioner Joaquin Almunia of his decision to overhaul the rule and hopes “the government’s initiative will allow the European Commission to close the procedure,” according to the statement.

Monti served as the EU’s competition commissioner from 1999 to 2004.