More on Locke v. Davey

A commenter on The Right Christians makes the following point:

Imagine two possible worlds. In one world, the government taxes all property at 5% of its value, but church property gets no taxes. In the second world, the government taxes no property, but gives churches a yearly bonus equal to 5% of the value of their property. In world two, I'll bet that just about everyone would admit that the state is actively financing churches. But how is world one (which happens to be the actual world) any different? In either world, the state has decided that churches should be 5% (of the value of their property) better off than everyone else.

The economic equivalence of tax deductions and government expenditures is a well-known topic of debate in law review literature. Many scholars reason as does the above commenter: An exemption or deduction is the same as a subsidy, because in either case the church is better off.

But one famous tax scholar, Boris Bittker, argues that an exemption is equivalent to a subsidy ONLY if everyone agrees that the tax base would OTHERWISE have included the church. It's impossible for every tax to touch on everything that exists, says Bittker, and you can have reasonable disagreements over what any particular tax is aimed at in the first place. In his words, "The assertion that an exemption is equivalent to a subsidy is untrue, meaningless, or circular, depending on context, unless we can agree on a 'correct' or "ideal' or "normal' taxing structure as a benchmark from which to measure departures." Boris I. Bittker, Churches, Taxes and the Constitution, 78 Yale L.J. 1285, 1304 (1969).

In other words, if you define the tax base as "all property owned by anyone," then the exemption for churches and other charities looks like, well, an exemption. But if you define the tax base as "all property owned by private individuals or for-profit businesses," then it no longer as obvious the churches and charities are really getting an "exemption" that is equivalent to a subsidy in economic terms.

More generically, if you tax A and B but not C, does that mean that C has an exemption that is equivalent to a subsidy? Or does it mean that you've decided to tax a group of things and that this group just happens not to include C?

I don't know whether I fully agree with Bittker's point here; I have to admit that if the government taxed all property but had an exemption only for churches (and not any other type of charities), it would look uncomfortably like an attempt to subsidize churches. I'm not as troubled by the exemption for all types of charities, although I'm not sure that I have a systematic reason for this distinction.

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My friends Tom West of the University of Dallas and Ken Masugi of the Claremont Institute are debating the result in Locke. West argues that Scalia and Thomas are flatly wrong, because 1) the Constitution does not mandate complete neutrality towards religion (otherwise the Pledge would be unconstitutional), and 2) conservatives should be nervous about promoting the idea that where the government declines to fund an activity, it is the same as if the government denied a constitutional right. Masugi's response argues that what happened in Locke really arose from discrimination against religion. West's further response is here.