The always-provocative Peter Singer has a fascinating column in this week's Forward in which he argues that charitable giving that benefits the poor should be eligible for tax breaks, but that giving to philanthropies that do not work on poverty issues should not.  

In my new book I point out that, according to UNICEF, 27,000 children under 5 die every day around the world from avoidable, poverty-related causes. That’s an emergency that we ought to be doing much more to prevent. If Obama were to increase the tax deduction for donations aimed specifically at reducing that terrible death toll, and the extreme poverty that causes it, I’d applaud.

But that doesn’t mean that I want to subsidize every charitable donation made by an American taxpayer. By far the largest slice of the roughly $300 billion dollars that Americans give to charity goes to religious organizations. I’m not religious, and I don’t see why people should pay less in taxes because they give to their church, synagogue or mosque.

No doubt some religious organizations do some good, but others definitely don’t. . .

I also don’t want to subsidize all of the museums, art galleries, theaters and performing arts organizations that are registered as charities. . .

In the United States, public schools in poor districts tend to start from behind when it comes to funding, because the property tax base just isn’t there. And rich school districts can tip the balance even further in their favor because their residents can better afford to donate money to their local schools. Such giving is often done through tax-deductible donations to nonprofit organizations and foundations that channel money to specific schools and districts. Since the rich are taxed at a higher rate than the poor, and are more likely than other taxpayers to itemize their deductions, the government actually gives an additional subsidy to schools in affluent districts.

Ultimately, Singer's suggestion that the government should distinguish between charitable organizations that alleviate poverty and those that do not seems untenable. Virtually every non-profit can make an argument that it works on poverty in some way. Even the largest university can point out the amount of financial aid given to students in need, many cultural institutions offer public education programs for schools in low-income areas, and virtually every religious institution does some kind of service work. It doesn't seem reasonable for the government to try to sort out whether gifts to a church that hosts a soup kitchen should be tax deductible, or whether only gifts to organizations that devote the majority of their budgets to poverty relief should be eligible. The reason that tax guidelines for non-profit donations are so broad is that the government doesn't want to get involved in deciding which organizations are worthy and which aren't, lest we end up with government subsidies only for groups with one political agenda or another.

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Look! It's the Intersection of Church and State: Somebody call the ACLU Last week I wrote about churches and synagogues being turned into homes. This week, homes are being turned into churches.

A man in Lake Bluff, IL recently converted a portion of his house into a church, and then claimed an $80,000 break on his property taxes because of a little known church-and-state loophole called parsonage. George Michael (no, not that George Michael) has a $3 million home in Lake Bluff, complete with an electric lift for his wheelchair-bound wife. But Michael and his family still found it difficult to attend church services (specifically Armenian church services) that were handicap accessible. So Michael took an online course and became an official member of the clergy thanks to the Church of Spiritual Humanism. He then went about constructing a church in his home.

Once the “church” was completed, Michael was able to ask for a huge discount on his property taxes. This discount is called parsonage.

Parsonage is the tax rule that allows clergy to exempt from their federal income taxes a portion of salary that's earmarked for housing costs. Nearly 100 years old, parsonage originated when many congregations provided housing to attract clergy to their communities. This exemption has broadened over the years to where today, clergy can exempt the annual rental value of their home from their taxable income, even if they own the home themselves.

In 2002, the Ninth Circuit Court debated the constitutionality of parsonage. Because of that case, Congress passed the Clergy Housing Allowance Clarification Act of 2002, which President Bush signed into law. The act clarified the constitutionality of parsonage and also made clear that a parsonage allowance is now limited to the fair rental value of the home. (Previously, the parsonage value was determined using any one of three tests.)

Though Michael was initially challenged by the Lake County Board of Review, the Illinois Department of Revenue eventually found that Michael’s church is a real church (he provided photos of a church altar, the church's affidavit of organization from January 2007, church bylaws and copies of weekly church bulletins dating to December) and that he is eligible for a tax exemption.

Who says religion doesn’t pay?

Last week the NY Times ran an article about how Megachurches are getting so big that they're doing things like buying shopping centers, which is fine, except when a church owns a store that makes money there's a question about whether they have to pay taxes on that property. Here's an excerpt from the article:Death, Taxes: and Megachurches?

Among the nation's so-called megachurches - those usually Protestant congregations with average weekly attendance of 2,000 or more - ChangePoint's appetite for expansion into many kinds of businesses is hardly unique. An analysis by The New York Times of the online public records of just over 1,300 of these giant churches shows that their business interests are as varied as basketball schools, aviation subsidiaries, investment partnerships and a limousine service.

At least 10 own and operate shopping centers, and some financially formidable congregations are adding residential developments to their holdings. In one such elaborate project, LifeBridge Christian Church, near Longmont, Colo., plans a 313-acre development of upscale homes, retail and office space, a sports arena, housing for the elderly and church buildings.

Indeed, some huge churches, already politically influential, are becoming catalysts for local economic development, challenging a conventional view that churches drain a town financially by generating lower-paid jobs, taking land off the property-tax rolls and increasing traffic.

But the entrepreneurial activities of churches pose questions for their communities that do not arise with secular development.

These enterprises, whose sponsoring churches benefit from a variety of tax breaks and regulatory exemptions given to religious organizations in this country, sometimes provoke complaints from for-profit businesses with which they compete - as ChangePoint's new sports center has in Anchorage.

Mixed-use projects, like shopping centers that also include church buildings, can make it difficult to determine what constitutes tax-exempt ministry work, which is granted exemptions from property and unemployment taxes, and what is taxable commerce.

And when these ventures succeed - when local amenities like shops, sports centers, theaters and clinics are all provided in church-run settings and employ mostly church members - people of other faiths may feel shut out of a significant part of a town's life, some religion scholars said.

I was reading this trying to think about whether I would feel comfortable working out at a gym that was owned by a church, and I don't think I would. In fact, I know I wouldn't. Later on in the article there's a point where a business manager at one of the big churches owns up to the church's motives:

Mr. Rieder, the church business manager, paused when asked whether people of other faiths would have felt comfortable at the event.

"We try not to discriminate in doing community service," he said. "There are Muslims and other non-Christians here, of course. And we do want to convert them, no doubt about it - that's our mission. We don't discriminate, but we do evangelize."

The same quandary confronts Pastor Clauson in Anchorage. "There is nothing inherently alienating about what we're doing economically," he said. "An Orthodox Jewish youngster or a conservative Muslim child encountering our programs would find zero intimidation."

Nor does he want his community to become divided along religious lines, he said. But at the same time, "we definitely want to use these efforts as an open door to the entity that we feel is the author and creator of abundant life - Jesus."

He added, "It's a tough balancing act."

Emphasis mine. Full Story

I can tell you right now I would never set foot in a mall or a sports complex that let me know I was going to get the Jesus spiel along with my purchases or basketball game.

This is a complicated issue on the tax front, and also on the ethical front. What happens when a church dominates the fitness scene in one town? Or owns the mall, or the movie theater? Would you shop there? And does the Starbucks that the church brought in need to pay taxes?

I know that Megachurches have been a good thing in a lot of ways, but this scares the shit out of me.