Churches and other religious institutions in American are almost always exempt from federal, state, and local taxes. The justification for this policy is usually that such institutions provide vital charitable benefits to society. While that is undoubtably true the benefits argument is not the strongest reason to support tax exemption. A better reason is that we need to maintain a distinction between the state and the church.
As Richard W. Garnett and Paul J. Schierl explain, the separation of church and state is not a reason to invalidate or abandon these tax exemptions but is instead a very powerful justification for retaining them:
The point of church-state “separation” is not to create a religion-free public sphere. It is, instead, to safeguard the fundamental right to religious freedom by imposing limits on the regulatory—and, yes, the taxing—powers of governments. After all, as Daniel Webster famously argued in the Supreme Court (and the great Chief Justice John Marshall agreed) the power to tax involves the power to destroy, and so we have very good reasons for exercising that power with care—especially when it comes to religious institutions.