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Opinion: Churches don't pay taxes. Should they?

Critics argue that church tax exemptions represent millions in lost government revenue. However, others say that churches can and should use their funds to support local communities.
St. James United Church in Montreal, Quebec.

From his office at St. James the Apostle, a 160-year-old Anglican church in downtown Montréal, Rev. Graham Singh is telling us about taxes. “Churches don’t like to talk about wealth. They almost pretend as though they’re poor.” In fact, as he points out, Christian churches in North America are the largest single landowning category of the charitable sector.

We spoke to Singh as part of our ongoing anthropological research into the complicated relationship between religion and public money in Canada. Since early 2023, we have been following Singh’s efforts to rebrand St. James as St. Jax, a church that houses not just worshippers but dozens of secular community groups and activities. Pivotal to his strategy: turn the building’s property tax exemption into rent subsidies for social organizations in a real estate market putting the squeeze on local non-profits.

Many Canadians don’t realize that religious properties are tax exempt. However, this privilege is increasingly being debated as organized religion recedes and many cities confront a looming affordability crisis.

A 2019 Senate committee inquiry into the charitable sector conserved the status quo, but for how long?

Economics beyond numbers

Critics argue that church tax exemptions represent millions in lost revenue, which municipalities could use to solve urgent social issues, such as affordable housing. In Montréal, an independent estimate put the amount of exempted taxes at $110 million a year.

Others view the numbers differently. University of Pennsylvania sociologist Ram Cnaan has measured the “halo effect” for decades. He calculates each church’s local economic impact, from the money it spends on flowers to the amount it saves taxpayers by providing counselling services.

Applying a similar metric in Canada, Sphaera Research CEO Mike Wood Daly estimates that churches contribute 10.4 times more to the economy than their assessed property taxes. It “demonstrates that the value of churches’ social impact is way above and beyond what the value of taxation would be,” he told us in a June 2024 interview.

However, economics is never just about numbers. Critics have ethical problems with tax exemptions, too. Atheists and humanists in British Columbia and Alberta argue that nonreligious people shouldn’t have to subsidize churches. In Québec, a wave of media coverage, including in La Presse, Le Devoir and Radio-Canada, has questioned how the government can justify exemptions after Bill 21 banned religious signs in the name of laïcité, or state secularism. Some also condemn social benefits for the Catholic Church following sex abuse scandals.

After the discovery of unmarked graves at residential schools, Iqaluit became the first city in Canada to partially rescind exemptions. Discussing this historic change in 2022, MP Lori Idlout asserted, “It’s not fair to the rest of the municipality to have to carry the burden of a faith-based group that itself is part of the history of colonialism.”

Religious institutions in Iqaluit now pay 25 per cent of their property tax, an exemption they must reapply for every three years. It represents about $40,000 a year for the local Catholic church, which its members say they cannot afford. Like many congregations, they have property but few liquid assets and support from the Diocese cannot be taken for granted.

Who should pay for heritage?

Iqaluit’s churches are relatively new. However, the situation is especially complex for religious buildings with heritage status. Crisis looms as 9,000 historic churches across Canada will likely close soon. In Montréal, there are over 400 historic churches. Singh’s team estimates 25 per cent are in dire economic straits.

Few people strolling by a historic church think about taxes, but the link is crucial. Université de Sherbrooke law professor Luc Grenon notes that the church tax exemption is inherited from a centuries-old presumption in common law that religion, by definition, helps the public.

In Montréal, the municipality still values heritage churches as both cultural symbols and tourist attractions. It wants private owners, like the Catholic Diocese, to maintain them, despite annual costs exceeding $100,000 for a single church.

And it is about more than just historic architecture. Despite Québec’s fraught relationship with religion, Montréal city Coun. Robert Beaudry sees the public value in keeping these buildings around: “Québec’s community networks, especially here in Montréal, were born in church basements…charity networks, too”, he told us in June 2024, “So, losing heritage buildings as identity markers is one thing, but the impact on all the neighbourhood communities is quite significant.”

Back at St. Jax, they are in a constant budget crunch, after building upkeep. With a property valued at $10 million, Rev. Singh’s congregation would have to shoulder a $150,000 yearly tax bill. That would sink them, Singh told us. “We’re just crunching along, like every other church, which is why they’re all closing.”

Redeeming exemptions?

Singh wants to tap into the enduring connection between religious property and social good to persuade the public that sacred spaces are worth saving. He is also CEO of Relèven, a non-profit that helps churches become financially solvent by expanding them into community hubs like St. Jax that become staging areas for social innovation.

“There’s this Christian wealth imbalance that we steward,” Singh says, acknowledging that regulations advantage religious institutions over other non-profits. “If a bunch of charities own this building, they could be paying tax, whereas if a church owns it, even if they don’t use it, they’re tax exempt. That’s unjust.”

Singh also noted that down the road from St. Jax, Al-Madinah mosque occupies a triplex not zoned for religious worship. Regulatory restrictions often limit newer religious groups from acquiring tax privileges. Singh estimates that the mosque pays about $100,000 in yearly property taxes, whereas St. Jax pays none.

For the team at Relèven, these inequalities don’t mean tax exemptions should be eliminated. In their view, that would be one step forward, two steps back. Instead, tax exemptions need to be redeemed. Church congregations can no longer “hoard” property for their exclusive use or underutilize it by leaving it empty most of the week: they owe it to society to put the building, and its tax privileges, to good public use.

Tax exemption for Canada’s historic churches is a looming social question, as thousands of buildings teeter on the brink of financial insolvency. Recent polls suggest that Canadians are roughly evenly split: just over a third approve of exemptions, a third do not, and a third are unsure what to think.

Whatever the way forward, it is clear that property taxes are about more than signing cheques to the government: they reveal the ethical and political stakes of a changing social contract.

The ConversationThe authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.