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.
