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Univ. of Kentucky College of Law

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Tuesday, July 12, 2011

A Proposal to Tax Church Land

Matt Yglesias makes the case that we should end the property-tax exemption for churches:

Urban land is a scarce commodity, and structures are valuable fixed assets. If you tax land and structures that are operated as homes and business, but don’t tax land and structures that are operated as churches, you end up with more land being used for churches and less being used for homes and businesses than would otherwise be the case. Now if the level of God’s affection for a town is determined in part by the square footage per worshipper of devotional space, this is a very reasonable policy.  But the more common view . . . is that the key factors are the depth of worshippers’ personal relationships with Jesus Christ. By contrast, it’s pretty clear that at the margin the quantity of business activity in a town is in part a function of the square footage available for business purposes.

I think this is a reasonable-ish argument when it's applied to big mainline churches.  Such a policy, however, would be punishing for inner-city communities. It's fairly well-settled that in many urban areas churches are the single most important community institutions.  Many of these places of worship are small and operate on a shoe-string budget. For store-front churches, the tax exemption could be the difference between helping underserved populations and shuttering the doors.  

Steve Clowney

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Comments

I'm heartily in favor of taxing the land under nonprofit buildings; I'd favor exempting the buildings themselves from taxation. Valuing land well and accurately is relatively easy; valuing buildings, particularly special-purpose buildings like churches, is much more difficult and expensive.

Many downtown churches sit on large pieces of land, bought decades or centuries ago, perhaps with the foresight of land speculators in the lay leadership. Frequently, the land is underused, and currently no mechanism exists to nudge it into more use.

But I encourage you to consider the effects (and costs) of taxing ANY buildings, and submit that we'd be wiser to simply tax land value, and treat buildings and their contents as private property, not subject to taxation. Land value, unlike the value of buildings and personal property, is created by the community, and is thus a logical and just base for taxation.

You might explore Henry George's Single Tax, best laid out in his landmark book, "Progress and Poverty," available online at its dot org.

Posted by: LVTfan | Jul 12, 2011 2:05:20 PM

Without taking a position on the proposal, I wonder why we would stop with churches. What about other land owned by nonprofits? For example, in some places in Wisconsin, the towns are trying to get The Nature Conservancy to pay taxes on their land because so much of the tax base is held by the tax-exempt conservation organizations. While the above discussions focus on urban land, this could be a problem for rural areas as well.

Posted by: Jessica Owley | Jul 13, 2011 7:05:25 AM

Exempting land used for churches is one thing; exempting land owned by churches, which in a typical case will often include a great deal of the land beneath skyscrapers that is in turned leased on a long term basis to the building owners (allowing the building owners to take a deduction for an asset that would otherwise not be depreciable), is less sensible.

The concern expressed for store-front churches is also probably misplaced. Store-front churches generally rent their space from a landlord in the for-profit sector, and generally neither the church nor the landlord receive a property tax exemption in that transaction.

Posted by: ohwilleke | Jul 14, 2011 11:17:11 AM

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