From: Tim May <tcmay@got.net>
Date: Thu, 6 Nov 1997 03:55:03 +0800
To: cypherpunks@Algebra.COM
Subject: Re: Taxing Churches for their views? Bad idea. (fwd)
In-Reply-To: <199711051838.MAA30824@ted.mncs.k12.mn.us>
Message-ID: <v03102800b0866998c9a9@[207.167.93.63]>
MIME-Version: 1.0
Content-Type: text/plain




List members should know that there is a debate about taxation of
corporations. That is, a corporation gets taxed on its profits, then the
profits are again taxed when they are dispersed in some form to the owners
of the corporation (shareholders). Thus, every dollar Alpha Corporation
earns as profit (roughly, sales revenues minus costs of doing business) is
taxed at the corporate rate, which is roughly 40-45%. Federal and state.
Not counting property taxes, energy taxes, etc.

Then the profits are dispersed, in some cases, to the owners and
shareholders, in the form of dividends or the like. This "income" is then
again taxed, at rates between 35 and 45%, again depending on the state and
other circumstances.

Bear this in mind when thinking about taxing churches or other charitable
contribution-based entities.

At 11:38 AM -0700 11/5/97, Brandon Crosby wrote:

>While I do not want a debate over tax exemptions in churches, 'Free Speech'
>may very well involve supporting canidates for positions in a democracy.
>This is the very basis for elections. However, one begins to question this
>reasoning when a church leader attempts to get into the government, using
>the church's tax exemptions, for either support of the church, support of
>self, or some illegal (or, at least, unethical) mix.
>
>Should churches be tax exempt? Without their long history of helping people,
>I doubt they would have any benifits. However, even if their privillige was
>removed, they would simply be able to donate less money to community causes.

(There's an important difference between "taxing churches," i.e., applying
the income tax to churches, and eliminating the "tax deduction" for
charitably contributions. I assume the discussion has mostly been about
taxing churches, based on the comments about "taxing them into penury." Tax
deductibility has not been an important factor for many to consider, I
believe, due to the complications of claiming the deduction, the limits on
deductions, etc.)

Most churches operate mostly on charitable contributions.  So, imagine that
the Mormon Church, for example, loses its tax-exempt status and must pay
income taxes.

Imagine a worker for Novell, in Utah. Novell pays 40% of profits in taxes
and, for this example, disperses the rest. The dividends or proceeds of
sales of stock are taxed at about 30%. A Mormon employee gives money to the
Mormon Church.. The Mormon Church pays 30-40% on this "income" (perhaps
less "expenses"--churches are going to have to act like corporations!).

(By the way, one of the big problems with taxing churches on income is this
very issue: what counts as a "profit" for the church?)

Do the math: the initial dollar earned by Novell has been taxed 3 times (to
multiple tax collectors, federal, state, and maybe local). And 75% of it
has been taken in the process.

This is the danger of taxation in general, and taxation of donations in
particular.

As to what the church does with the money, who cares? Another way of
looking at a church is as a pooling of donations to accomplish some end,
e.g., saving souls, getting the U.S. out of Viet Nam, removing bad engrams,
etc. Why should people who have already been taxed twice (first the
corporations, then their dividends) be forced to pay a third set of taxes
just because they are donating?

Oh, and the same logic applies to a political action committee.

It doesn't make sense. Which is why we can expect to see it in the tax code
next year.

--Tim May



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