"There is said to be an old Arabian proverb: "If the camel once gets his nose in the tent, his body will soon follow." This expression is especially pertinent in the tax exemption context. Churches are tax exempt under the principle that there is no surer way to destroy the free exercise of religion than to tax it. If the government is allowed to tax churches (or to condition a tax exemption on a church refraining from the free exercise of religion), the camel's nose is under the tent, and its body is sure to follow. But that's not just my opinion; it's the understanding of the U.S. Supreme Court.

In its 1970 opinion in Walz vs. Tax Commission of the City of New York, the high court stated that a tax exemption for churches "creates only a minimal and remote involvement between church and state and far less than taxation of churches. [An exemption] restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other." The Supreme Court also said that "the power to tax involves the power to destroy." Taxing churches breaks down the healthy separation of church and state and leads to the destruction of the free exercise of religion."

Why don't churches pay taxes? - latimes.com