Pray, Hear Me Out

by Don Boudreaux on August 28, 2010

in Religion, Subsidies, Taxes

Back in April 2009 I sent the following letter to the Washington Post – a letter that was never published nor, as far as I can recall or find, posted on-line before today:

E.J. Dionne rightly applauds the healthy state of religion in America (“A Resilient Christianity,” April 12).  But I wonder if Mr. Dionne ever stops to reflect that America’s thriving religions are strong evidence against his often-expressed belief in the necessity of regulation by government.

Americans’ principled commitment to the First Amendment means that the market for religion in America is arguably the freest market on earth.  In the U.S., no religion receives government funding; every religion in America is funded exclusively with voluntary contributions.  No religion is protected by government from the competition of other religions.  No religion receives special privileges from government.  No licensing requirements exist to thwart the creation of new religions or churches.  Similarly, no preacher, priest, rabbi, or other religious worker is licensed by government.  Entry into the religion market is utterly free.  Government has no regulatory agencies to screen or validate religious doctrines before such doctrines are allowed to be marketed.  There is no cabinet-level office devoted to religion.  And no one is forced to attend religious services or to study religious doctrines.

If such freedom works so well for religion, why doubt that it would work equally well in other industries?

Sincerely,
Donald J. Boudreaux

A very bright personal friend (who is on my private e-mail list of folks to whom I send my letters-to-editors) dismisses the above argument.  (This argument, by the way, is most famously advanced by my former GMU colleague Larry Iannaccone, now a professor of economics at Chapman University.)  My friend argues that each and every church’s exemption from taxation means that religion is, in fact, subsidized heavily in the U.S. – subsidization that my friend suggests accounts for religion’s success in this great republic.

My friend and I have argued with each other repeatedly on the nature of subsidies.  I do not grant that government’s decision to refrain from taking X‘s money means that government subsidizes X. The tax-examption might be unwise policy, and it might be unfair (by some plausible guideposts) – and it almost certainly gives the tax-exempt organizations an advantage that they would otherwise not possess.

But tax-exemption does not involve taking money from Y and giving it to X. That fact is vital.

Also, unlike direct (and, I would argue, real) subsidies, tax-exempt status is far less prone to political manipulation.  True, the government can threaten to end (or to reduce) tax-exempt status for industries that currently enjoy them (although arguably not for churches, given the First amendment).  But the value of the tax-exemption depends far more directly upon the private actions of the tax-exempt firms – their market successes and failures – as well as on the free choices of customers – than does the value of real subsidies depend upon these non-government-directed factors.  And this fact means that tax-exemption is less likely than are real subsidies to be used in attempts by government to micro-manage industries.

I will later write more on my friend’s objections to the economists’ case for why freedom of religion in the U.S. is responsible for strong, thriving churches in the U.S.  (I don’t wish this post to grow too long.)

But allow me to end this post with one final thought: the fact that every religious leader (and activist) in the U.S. is quite aware that there is near-zero probability that government will ever bail out any failing religion or church with real subsidies means that religions and churches in the U.S – even the Big Ones – do not enjoy the prospect of a species of (real) subsidies that many other private industries and firms (especially post-2007) now enjoy.

Be Sociable, Share!

Comments

comments

63 comments    Share Share    Print    Email

{ 1 comment }

John B August 31, 2010 at 4:35 pm

Isn’t the tax exemption a red herring? It applies to all non-profits. If that were the defining characteristic, wouldn’t you have to argue that the “market” really includes all not-for-profit charities (as opposed to just religions). Is a market that broadly defined as “free” as what is posited for religions? I think the observation is meaningful and that the tax exemption issue is beside the point.

Previous post:

Next post: