Several years ago, the Canadian government started offering churches and other organizations student grants in order to employ young people desirous of finding summer jobs. One of our church staff applied for grants in order to help hire students to work in our summer day camps. At first, this did not concern me since both the community and students were blessed, but amid the hustle and bustle of ministry, I failed to consider the potential consequences of this choice. Before long, our church elders made a calculated decision to avoid all further government grants and fund all of our ministry with the money generously given by God’s people. This principled decision was made in order to ensure that: 1/ we would never find ourselves beholden to State authority for the theological, ethical, liturgical or ministerial decisions we made, 2/ in order to be true to our belief that the Church and State are separate and therefore at arm’s length financially, and 3/ to position ourselves to resist all future intrusions by the State into Christian ministry. Even though the grants only amounted to a fraction of a percentage of our ministry expenses, and therefore had no real impact on our church, we made this decision based on the principle of separating ourselves completely from government influence over our worship and ministry. Within a few years our foresight was confirmed when the Employment and Social Development Canada attempted to deny summer student grants to organizations that refused to agree with their ideologies. Global News would report in 2019: “About 400 of them were ruled out of getting funding under new rules that say the money cannot be used to undermine human rights, including 26 groups over their approach to abortion, family planning, sex education or related issues.”[1] In denying State funds we were able to distance ourselves from any perceived compromise due to State interference. Sadly, some Christian ministries, heavily reliant on summer grants, struggled to maintain their ministries in the communities they served.

Forced church closures and CEWS

Registered Christian churches, who own their own facilities, are exempt from paying municipal property taxes. They also can apply to receive a partial refund for purchases they have made that incurred the Harmonized Sales Tax (HST). Further, church staff members deemed “clergy” are eligible for Clergy Residence Deductions on their income. All this is to say that churches do not meaningfully contribute to the tax base (a legal reality long applied to mosques, synagogues, temples and various charities doing charitable work as well), but save taxpayers millions of dollars annually through their work in the community. Cardus researchers studied ten religious congregations and reported:

The ten congregations contributed a total of $45 million of economic value to the city based on a combined operating budget of only $10 million. In simple terms, the dollar value of having a church in a community is about 4.5 times its annual budget.[2]

The study further underscores the economic benefits that churches offer their communities including,

  1. Outside space – parks, playgrounds, parking, recreation
  2. Direct spending on operations, capital projects etc.
  3. Education – nursery, day care, schools
  4. Magnet affect – drawing people into the area for events and life celebrations
  5. Direct impact – suicide prevention, job hunting, addiction recovery programs, health promotion, youth civic engagement, immigrant support etc.
  6. Community development – housing initiatives, job training, lending programs
  7. Social capital and care – space for social programs to operate from, volunteering, in-kind support.[3]

All taxpayers, regardless of creed, should rejoice that churches and other charities actually reduce the taxes that they would otherwise pay if the State was saddled with these burdens! For every $1.00 churches spend, the community receives $4.50 in benefits.

In spite of this mutualistic relationship between churches and the government, in 2020-2021, provincial governments have repeatedly forced the closure of churches and businesses, but offered them the opportunity to apply for the Canadian Emergency Wage Subsidy (CEWS). Why? Because churches are not considered an Essential Service in any province within Canada. While an ethical argument could be made that the forced closure of churches by the State obligates the State to compensate churches, several concerns arise when churches apply for CEWS, or other subsidies or grants. Not only are churches receiving taxpayer funds, to which they do not meaningfully contribute, but this funding necessarily puts the churches in a position of reliance upon the State and/or fails to maintain the arm’s length relationship between them. The rapidity with which churches applied for these funds also begs the question: did they apply because they actually experienced a substantive decline in giving necessitating a real and pressing need for CEWS funds? How many of the recipient churches experienced an actual reduction in revenue? While I suspect that some church applicants needed CEWS and some did not, these funds may put a church in a difficult place to resist the ongoing claims of the State to wield authority over our counselling, speech, online content, worship and ministry.

Here are three reasons to avoid taking any further funds from the State:

Taking State funds leads to real, potential, or perceived compromise

Churches would be wise to take all necessary measures to avoid accepting State funds due to perceived or actual compromise. Consider the following reasons:

1/ Fiduciary conflicts of interest: Salaried church leaders place themselves in a conflict of interest, by failing to maintain a fiduciary arm’s length relationship, when they permit the State to help pay their wages. Should the values of the Church and State clash, churches are wise to act in their own self-interest, and that requires financial self-reliance.

2/ Freedom from coercion: While some church leaders have responded to State-mandated closures willingly, others have been coerced into doing so contrary to their consciences and convictions. Financial penalties in the form of massive fines, and cancellation of insurance are notable forms of coercion. That being the case, why add the fear of losing one’s wages to the admixture of financial threats churches face?

3/ Taxpayer criticism: Churches that receive State funds open themselves up to criticism from taxpayers who may demand to know why their funds are being used to support religious institutions. Just as most Christians would not want to pay taxes that fund the local staff at a mosque for example, why should the unchurched fund churches they do not attend?

4/ Freedom to fight the culture wars: There is a very real possibility that lockdowns, or stay-at-home orders, could repeatedly be used to close churches/businesses due to viral threats or by climate change activists intent on reducing carbon emissions. Additionally, the Federal Government has passed Bill C-10, pending Senate approval, which will regulate the Internet and free speech. Any knowledgeable Christian, in tune with the culture wars we are fighting, knows that faithful, biblical churches will be targeted for their stances on sexual ethics and more, and especially those reliant upon the Internet to get their message out. This confluence of factors will make Gospel ministry increasingly difficult in this anti-Christian age, and the more self-reliant churches can be, the greater freedom they will have to remain faithful and bold.

What about Church Tax-Exemptions?

1/ Tax-exemptions are not a privilege bestowed by the State.

It is common to hear clergy refer to the tax-exempt status of churches as a “privilege” or “blessing” bestowed by the State. For this reason, it is even more common to hear the public cry for the removal of the Church’s tax-exempt status, especially when churches defy lockdown orders. A lack of teaching and historical understanding has contributed to the myth that tax-exemptions are a gift from the State, a view which has hindered churches from pushing back against unjust lockdowns.

To the contrary, taxation is a claim by the State to exercise authority over the one paying whatever tax is being levied. With this in mind, the Church’s historic tax-exempt status is an acknowledgement that the State has no authority over the worship or ministry of the Christian Church. Much like a foreign embassy exists on sovereign land, but remains untaxed by the State within which it resides, so the Christian Church is Christ’s Embassy (Eph. 6:20; 2 Cor. 5:20), untaxed by the State. Clergymen were considered ambassadors of Christ, and Church-owned lands a place of refuge for the citizenry. Tax-exemptions are therefore to be understood as a form of immunity from State authority for both the clergy and the Church as they serve the purposes of King Jesus.

While this is clearer in the USA due to the First Amendment’s insistence that the government not exercise authority over the Church, the principle has historically been understood in Western societies. Fr. Raymond J. de Souza, editor-in-chief of Convivium writes in an article entitled Why churches don’t pay taxes:

There are limits, though, to what the state can tax, because there are limits to the state’s authority. Until taxes on everything became standard practice, taxation was linked to the territorial authority of the sovereign. That’s why taxes were levied at borders and duties were charged on imported goods. It was not just a matter of practical tax collection. It emphasized that upon entering the territory of a sovereign, the authority of that sovereignty was expressed in taxation. Empires levied imperial taxes in their provinces. Hence, Jesus advised rendering unto Caesar, not the Galilean town council.[4]

The tax exempt status of the Church signals sovereignty over her own affairs.

By the same token, the Church would not interfere in matters pertaining to the State’s defined authority. The trouble arises when modern States extend their authority beyond the job description assigned to them by God, which limits their authority primarily to matters of public justice (i.e. to bear the sword – Rom. 13:4) into all areas of life: health care, dog licensing, land use, etc. These might be prudent decisions and citizens may be wise to submit to them for pragmatic reasons (i.e. speed limits and fire codes), but on principle, the Church is not obliged to surrender authority over her worship and ministry to any governing official, save in matters of public justice. This immunity from State interference in worship and ministry may also be part of the rationale for Section 176 of the Canadian Criminal Code which forbids the interruption of worship or arrest of a clergyman as he fulfils his duties as an ambassador of Christ.

2/ The State is protected by recognizing tax-exemptions.

Churches are free to speak to political issues and voice their concerns on moral issues, matters of injustice, human rights or other concerns. But, The Canadian Centre for Christian Charities instructs churches and other charities to avoid partisan political endorsements, while not forbidding engagement with political issues.[5] So, while the Church must insist on maintaining sovereignty over her own affairs, even as she benefits the citizenry, the State also benefits by forbidding the Church undue influence over partisan political issues. To be sure, the State can confront the Church if she is guilty of criminal conduct as God’s “bearer of the sword”, and the Church can confront the State were it to act immorally, but they remain truly separate on partisan matters.

What would happen if the State refused tax-exemptions to churches, thereby claiming authority over Christ’s Bride? Well, I suspect that the gloves would be off, to borrow a boxing analogy, and some churches would become highly partisan. After all, what would legally restrain them from re-forming into political parties, funding political parties, or directly endorsing political candidates? Nothing. But, by maintaining a respectful, symbiotic relationship, with each assigned its own sphere of authority, both Church and State are able to fulfil the duties each assigned to them by God.

Conclusion

In conclusion, while some churches refuse to apply for tax-exempt status under the false assumption that it will indebt them to the State, the opposite is actually true. Tax-exempt status has historically signified the autonomy and separation of Church and State. By both refusing to pay taxes, and refusing to accept tax dollars, the Church can fulfil her functions under the Lordship of Christ and out from under the lordship of the State.