Chief Justice John Marshalwrote, in the Supreme Court ruling in McCulloch v. Maryland (1819), “That the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create . . . are propositions not to be denied.” Yet for the last 196 years, people have repeatedly tried to deny those propositions.

The latest example involves the Supreme Court’s pending ruling on the same-sex marriage issue will affect the non-profit status of religious institutions, such as colleges and universities. Many people seem to deny that taxing such institutions would have any nefarious effects, much less “destroy” them. Many other—more knowledgeable—understand the destructive implications for religious organizations and consider it a fringe benefit. 

Leslie Loftis explains why religious organizations have preemptively been exempt from taxation—and why religious freedom requires they remain exempt:

The argument we must make is rather simple. Take the Religion Clauses of the First Amendment: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof,” and then take this passage fromMcCullough v. Maryland: “All subjects over which the sovereign power of a State extends are objects of taxation, but those over which it does not extend are, upon the soundest principles, exempt from taxation. This proposition may almost be pronounced self-evident.”

That government may make no law establishing religion or prohibiting the free exercise thereof is a clear statement that the power of government does not extend over the subject of religion. Therefore, religious institutions are exempt from taxation, not by tax code, but by self-evident, sound principles. That’s the simple summary. In the details, the argument gets plicated. I will introduce a few of the major issues and provide a basic explainer about how we got here.

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