I agree that the Catholic church is very influential. I do not believe that taxing them will cut short their services. They have vast holdings and investments which generate an income Bill Gates would be in awe of.

Here is an article from Ireland, by the way. They have some interesting perspectives on this issue.

Vatican grapples with new taxes and tales of death - The Irish Times - Sat, Feb 18, 2012

Excerpt:

It’s worth pointing out here that the Italian hold on the so-called “universal” church is stronger than ever. Remarkably, Italy still boasts by far the largest body of elector cardinals (those aged under 80), with 30 of the 125 electors being Italians.

If cardinals were appointed on a proportional representational basis, it would mean that Italy had a Catholic population of just under 300 million, rather than 50 million.