Understanding the Catholic Church-tax in Germany

A new decree in Germany will have any Catholic person that does not pay the Catholic church-tax be ineligible for the sacred rites of Holy Communion or burial.  See the BBC story here.  (HT to TA Jerrod.)   There are many interesting aspect of this story, but some background is necessary.

For many years, most religious individuals in Germany (predominantly Catholic and Lutheran) have not made religious contributions directly to their churches but rather have paid them through the government's tax collection agency at the time they pay taxes.  This donation is called the "church tax," but the name can be misleading.  It is not a tax like the income tax is a tax, so a membership fee might be a better name.  When paying their taxes, they check off their religious identification on the tax forms, and then the government withdraws their contribution on their tax forms.  The government then transfers the money to the church while keeping a little for itself in the form of a collection fee.  But it is like a tax in that a specific percent is specified and because the money is used to fund the church's operations.  For most churches using the church-tax system, the tax is 8 or 9% of the individual's tax bill (e.g., if I pay 1000 in taxes, then I would pay an additional 80 or 90 in church-tax).  Churches with large populations generally use this tax as it is cost-effective, but small churches might not use this system but rather collect their own donations like most churches in the USA do to avoid paying those collection fees.

I make three quick observations.

First, in our class we will discuss how many services provided by a religious group are "club goods."  Communion and burials are already excludable services, so there has already been a boundary between those who receive these services and those who do not.  The policy change merely changes the location of the boundary.  But as we will see in class, these boundaries are important for the group's success because they create incentives for people to contribute to the group, and the group would not survive without those contributions.

Second, we will also discuss in class some of the differences between religion in the USA and religion in parts of Europe.  In short, there is a much more recent legacy of intricate state-church relations in Europe, and the Germany church tax is just one example.

Third, although the differences between the USA and Europe are striking, it is still the case that how religion is practiced on both continents depends to a certain degree on what courts have decided about what is appropriate.  As stated in the article, a retired professor is challenging this policy in court.  Ironically, in the USA it is the IRS that has arguably the biggest influence on religion of any government institution because they determine when churches in the USA comply with US tax code to receive tax-deductible religious contributions.

Update 27 Sep 2012:  The German Court ruled in favor of the Catholic Church, i.e., that German believers who refuse to pay the church tax could be denied sacraments and a religious burial.  See here.