The research topic of this PhD thesis is church tax. Church tax raises about 80% of the income of the established church Folkekirken in Denmark, which makes it the economic foundation of the church. Approximately 75% of the Danish population are members of Folkekirken and, therefore, voluntarily pay on average 0,87% of their gross income in church tax. Yet, according to a survey done in 2016, only 17% of Danes said that religion played a significant role in their lives. This seeming contradiction poses the question: Why do the Danes pay church tax? The purpose of this study is to give an answer to this question and to further enhance our understanding of the phenomenon of church tax.
The thesis consists of six independent papers. Through a comparative financial analysis Paper I show large differences in the level of income for the seven established churches; the established churches in the five Nordic countries, in Scotland and England. There seem to be a connection between the type of income and the level of income. The established churches in Denmark, Sweden and Finland have the highest income and their main source of income is church tax. The two poorest churches, the Church of Scotland and the Church of England, have their main source of income from donations and fundraising. Norway and Iceland are ranging in the middle and both financed via the general taxes on the public budgets.
Paper II contains a comparative analysis of the membership of the seven established churches and their usage of rites of passage. In each of the Nordic countries, a large majority of the population are members of the established churches, membership figures ranging from 65% to 77%. In Scotland and England, the self-reported affiliation to the established churches has plummeted to 20% and the speed of this decline has accelerated both in Scotland and England. In the Nordic countries the pace of decline is slower, though accelerating.
In Paper III we link the empirical findings from Paper I to behaviouristic and institutional theory. The reason why the income of the established churches in Iceland and Norway is higher than The Church of England and the Church of Scotland is probably that the former are embedded into the public structure. Their budgets will not change swiftly, even when the populations are paying less attention to religion. In contrast, Church of England and Church of Scotland are dependent on the willingness of the population to donate to the churches.
The budgets of the established churches in Iceland and Norway are also subject to budget control and political negotiation. Any increase in their budgets will have to be negotiated in competition with other welfare areas. This might be why there income is lower than the income of the established churches in Sweden, Finland and Denmark. The latter do not have to negotiate to increase their budgets. As their main source of finance is a form of taxation, their budgets will increase automatically as long as there is growth in the economy in general.
The biggest difference in the level of income is found between churches financed by a voluntary church tax on one hand, and churches financed by voluntary donations on the other hand. We argue in Paper III that it is the differences in the choice environment of church tax and donations, which result in very large differences in income for the established churches. Paying church tax is the default for most Danes, Swedes and Finns. Choice environment theory points out that if people had to opt in to pay church tax during adulthood and if they had to pay it directly to the church and not via the tax authorities, only a smaller share of the population would continue to pay. This would not be due to a change in religiosity or attitude towards the church but to a change in the choice environment of the church tax only.
It is a popular assumption that the Danish state subsidizes the salaries of the priests in the established church as a consequence of the expropriation of farm land from the priests during the land reform of 1919. In Paper IV we show, however, that the land expropriation was not the cause of the economic despair of the church around the turn of the century and it is unrelated to the state financing of the priests. Instead, the abolishment of tithes in 1903 seems to be the root cause. A lump sum replacement for the tithes was struck by hyperinflation and without tithes the population growth was not matched by an increase in income.
In 1920 the church tax was introduced and hugely benefited the economy of the established church. I argue in Paper V that church tax is a hybrid between a tax and a membership fee. It is calculated and collected as a tax by the state, but it is only mandatory for members of the church. This construction raises a cascade of questions regarding the political and legal legitimacy of the church tax, which is discussed in Paper V.
Paper VI presents evidence from church economy as input to the dispute between neoclassical and behavioural economic theory. We conclude that behavioural economic theory more often give plausible explanations to the empirical data within church economy.