Why It Would Be Really, Really, Really Stupid to Eliminate Charitable Deductions for Churches

I’ve seen and heard quite a few comments from folks recently about the possibility of eliminating the charitable tax deduction as a way of balancing the federal budget. My secular friends of both conservative and liberal persuasions, and a few of my liberal religious friends often complain that a lot of church energy is spent not on helping the poor, but on providing country-club services for their members. They point to celebrity preachers who have made “ministry” into a big business.


There are two main reasons, from an economic perspective, why eliminating the tax deduction for charitable contributions to religious organizations would be a bad idea.

First, churches have an enormous positive economic impact on their communities. It has been referred to as the “halo effect.” The researchers in the linked article gauge the average net economic contribution of churches to their local communities at anywhere from two to six times their annual budgets. In other words, every dollar you give to a church is creating more than a dollar of value. This is due in part to the way that churches multiply their ministry by the volunteer power of their constituents.

There are few other organizations that can compare to this kind of value multiplication. Cities who grant tax breaks for a new Wal-Mart often find that the economic effect is negative. Local churches (and, I would guess, other religious organizations) are a much better investment. (I think it’s debatable whether or not this kind of deduction should count as a subsidy, but that’s another topic).

Second, the people affected most by this deduction would be the poor—not only because it would hurt ministry to them, but because the poor are more generous. People at the lowest end of the income scale give an average of 4% of their income to ministries that directly benefit their communities. Upper-middle-class and rich folks give only around 3%. (There are both psychological and social reasons for the stinginess of the wealthy). I recognize that most of the poor and middle-class are already receiving the maximum tax deduction allowed, but these giving patterns in poorer communities reflect the kind of civic engagement and social responsibility that people like Rick Perry, Rick Santorum, and Newt Gingrich (none of whom tithed last year, while insisting that churches, not government, should take care of the poor) talk about all the time. Why would we signal that we no longer wanted to encourage this kind of engagement?

Every fundraising expert I know talks about the importance of motivating a community to give—not just individuals. When a community takes on a big task (a building, a mission trip, an event sponsorship), the first big gift sets the tone and pace for the entire giving effort. It takes a lot of $50 gifts to match the first $5000 gift. We’re not just talking about the giving of individuals. We’re influencing the giving patterns of communities.

From a political perspective, there are two reasons I find all of this rather irksome. The first is that this is yet another way that people are proposing we avoid taxing the wealthiest people in the country at rates equivalent to the rest of us. The second is that this rhetoric is a favorite argument by people who disagree with the way churches “meddle” in politics. People have made these same anti-church arguments when the church got involved in civil rights, child labor legislation, women’s suffrage, and so on. They do not make the same arguments for other organizations: the humane society, environmental clubs, public health charities, higher education, and arts charities can lobby for legislation for animal rights, environmental protection, and public funding for education and the arts with minimal public outcry. It is fine for them to spend money on “evangelizing” and recruiting more members.

From a historical and theological perspective, I know some of my religious colleagues find this kind of reasoning about the economic value of churches rather crass. They like thinking of the church as the “Body of Christ” but not in terms of corporations (from corpus, “body”). The church had no 501(c)3 status in the Roman Empire, where it spread like wildfire, just as it has no privileged status in modern China, where it has thrived underground. That’s fine. I will concede the point that my giving should not be tied to some kind of tax benefit, that tithing should be a way of life for anyone, religious or not, who wants to be part of something larger than themselves.

But if we’re going to talk about budgets and priorities, then let’s actually think about the kind of place we want to live instead of just grasping at every possible source of revenue. When households face a financial crisis, short-sighted people first eliminate their charitable giving and later think about things like their cable bill. Those who understand that budgets are about priorities and character make sure that giving, saving, and spending are all part of their plan. Prioritizing giving helps us recognize how much we already have.