Of Church, State, and Taxes

Christianity Today has had its eye on a story that began when Rick Warren, pastor of California megachurch Saddleback Community, deducted $79,999 for housing costs on his 1995 taxes. The IRS challenged the deduction, claiming that the house was only worth $59,479. What started as an argument over $20,000 quickly morphed into a question of whether clergy should be entitled to housing deductions at all. Critics of the “parsonage exemption” posit that if the government gives tax breaks to religious ministries, it’s kind of like giving them money, and if the government gives ministries money, it’s kind of like establishing religion.

The parsonage exemption might seem unreasonable when viewed only in light of the Constitution’s famous establishment clause: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” As commonly interpreted today, this means the government can’t privilege religious organizations in any way. (Common interpretation has little to say about the second half of the clause.) But the question of taxation and churches predates the American Constitution by centuries. Tax exemption for churches grew out of this history, not out of early American political theory, and it made good sense to the lawmakers who put it on the books.

In the Old Testament, priests were exempted from taxation by Pharaoh (Gen. 47:26) and by Persia’s King Artaxerxes (Ezra 7:24). Under the laws of Israel, Levites, the priestly tribe, actually received something like a tax. The Lord decreed, “I give to the Levites all the tithes in Israel as their inheritance in return for the work they do while serving at the Tent of Meeting” (Num. 18:21).

Unlike Levites, early Christian leaders lacked priestly status or privilege, and the Roman Empire tended to be less understanding than Pharaoh and Artaxerxes had been. Church leaders, when the Romans could identify and isolate them, were more likely to suffer special punishments than to receive special benefits.

This began to change with Emperor Constantine’s conversion to Christianity in 311. Though Constantine had no desire to impose Christianity on his entire empire (“The struggle for deathlessness must be free,” he said), he did pass laws favoring Christianity over paganism. Christianity became mandatory in the empire in 380 under Emperor Theodosius, who went on to ban all pagan activities in 391. Christianity thus became an “established” religion and settled into a long period of perks and privileges from the state.

For all of the medieval church’s power, though, it was not always exempt from taxes. (Here I refer to the Western church; the Eastern, or Orthodox, church also enjoyed benefits of establishment—and still seeks to exercise some of those benefits in Greece, Russia, and elsewhere.) The papacy controlled and taxed the Papal States, but emerging kings and lesser rulers in the rest of Europe frequently sought to control and tax local church properties. When the papacy was strong, it fought such attempts; when the papacy was weak, secular authorities sometimes bent churches to their wills. Nonetheless, the church managed to amass considerable wealth and political power during this period.

The Protestant Reformation challenged many aspects of medieval Catholicism, among them the wealth and political influence of the Roman church. Most Reformers did not, however, challenge the basic idea of establishment. Lutheranism flourished with the backing of German nobles. In John Calvin’s Geneva, church leaders served as the town council and municipal court. In Anglican Britain, a parish congregation automatically consisted of—and drew its revenue from—everyone who lived within the parish boundaries. Only the so-called “radical Reformation” argued for freedom of religion in anything like the contemporary sense. The other Reformers merely sought freedom from Rome.

The American colonies largely adapted European church-state systems. Calvinist Puritans in the Northeast founded a Geneva-esque theocracy. Virginia Anglicans divided their colony into parishes and gave a group of church officials in each parish the right to levy taxes. Roman Catholics in Maryland established their own parish system. Other than tiny populations of Baptists, Quakers, and Anabaptists, everyone believed that religious institutions deserved some kind of privileges. As the colonies banded together, though, which institutions deserved what privileges became the sticking point.

The Constitution solved this problem by abolishing European-style church establishment, but it hardly ended the accordance of benefits to churches, particularly in the area of taxation. Virginia exempted churches from paying property taxes in 1777, followed by New York in 1799 and the city of Washington in 1802. The Seventh Congress also passed a property tax exemption in 1802. Nobody viewed these laws as contravention of the establishment clause—which, after all, states that “Congress shall make no law … prohibiting the free exercise” of religion. European rulers had used taxes to prohibit the free exercise of religion before, and Americans didn’t want it to happen here. (Instead, America limits the free exercise of religion with zoning regulations, privacy law, education policy, restrictions on government grants … but that’s a different story.)

Property tax exemptions for parsonages are currently in force in all 50 states. Due to concerns about the Warren case, the exemptions have been reaffirmed unanimously by both houses of Congress as well. Apparently, treating churches more like schools than like factories still makes sense to lawmakers. What makes no sense is the connection critics wish to draw between subsidized housing for pastors and the medieval or early modern parish system—the only form of establishment the framers of the Constitution knew well enough to try to avoid.