Under that reasoning, NO one should be taxed. The government needs money to function though. Yes, they spend too much, and sometimes on the wrong things, but that's a separate issue.Chief Justice John Marshall said, "The power to tax is the power to destroy".
No, the separation of church and state only includes that the government can't create a State Religion or prevent the free exercise of religion (as long as it doesn't include anything illegal) and that religious groups can't legislate their beliefs and impose them on everyone else. There's nothing about the taxation of church property and business dealings.A "wall of separation between church and state" MUST include the non-taxation of religious institutions.
Anyone who thinks the big "megachurches" aren't just profit-driven businesses is deluding themselves, and for most people, church is mainly a social gathering, a club, with varying degrees of exclusivity or inclusivity, depending on the church. Many religious organizations exist primarily to take advantage of tax exemptions. Heck, there's a guy living in my town who turned part of his house into an exclusive church for family members.
Yes, some churches do good things for the community, like run homeless shelters or soup kitchens, but most of those that do, that's a tiny fraction of their religious activity. I see nothing wrong with homeless shelters and soup kitchens themselves being tax-exempt, but the rest of the religious establishment should pay up.