Taxing Rooms, Taxing Churches
Wednesday - May 20, 2009
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I know some people are unhappy that the Legislature trimmed Act 221 that gave huge tax breaks to venture capitalists investing in Hawaii. I’m not unhappy.
1) We’ve been more generous than most states.
2) Good startup companies should not need big tax breaks to attract money. Their product and business plan should do it.
3) Tax breaks are inherently unfair to others.
4) I suspect the complainers are what’s-good-for-business Republicans, venture capitalists and lawyers representing them and startups.
5) Gov. Lingle wanted 221 cut back and lawmakers accommodated her.
In the old days, I’d have agreed with those who say tourists pay little attention to the hotel-room tax. But things have changed. If you go to Orbitz or the Outrigger Waikiki Beach site, you’ll find a room this week at $159 but a $19.02 tax and the grand total are prominently displayed: $178.02. Orbitz also displays the tax and total. So ignoring the TAT ain’t possible anymore.
Why shouldn’t we tax churches, at least on their property holdings if not on ministerial salaries?
It’s not unthinkable. It’s been raised in several states because local governments have property taxation power separate from any federal issue of religious freedom under the First Amendment.
States have given exemptions mainly because of the argument by churches that taxation would either restrict them or even destroy them. So not wishing to lean too heavily on any church, the states have gone along with the exemption. But they don’t have to.
Some churches have enormous property holdings and may even lease out property. Not every dollar earned that way always goes to charity work. Some is plowed back into new property holdings. Total church holdings in the U.S. are estimated at $118 billion.
A key case for our law-makers to consider is Walz v. Tax Commission of the City of New York in the Supreme Court. Walz sued to stop property-tax exemption for properties used solely for religious worship. He argued that the exemptions indirectly required him to make a contribution to religious bodies and thereby violated the establishment clause of the First Amendment. In a 5-4 decision, the court held that exempting church property is permissible, but not constitutionally required.
In 1972 the federal courts began making the same shift. In Christian Echoes National Ministry, Inc. v. U.S., the Tenth Circuit Court held that “tax exemption is a privilege, a matter of grace rather than a right.”
So why not tax churches on the basis of any property not exclusively used for narrowly defined religious purposes?
It strikes me as appropriate for the members to raise the money for those taxes, and for the church to pay capital gains on the sale of buildings and lands.
Ben Franklin wrote that “when a religion is good, I conceive it will support itself; and when it does not support itself, and God does not take care to support it so that its professors are obligated to call for help of the civil power, it’s a sign, I apprehend, of its being a bad one.”
Presidents Madison and Garfield advocated taxing church property. President Grant’s 1878 message to Congress included a petition with 35,000 signatures, saying “we demand that churches and other ecclesiastical property shall be no longer exempt from taxation.”
Nothing happened.
But shouldn’t we talk about it next legislative session?
Who’s the gutsy law-maker who will raise the issue?
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