So the spies questioned him: "Teacher, we know that you speak and teach what is right, and that you do not show partiality but teach the way of God in accordance with the truth. Is it right for us to pay taxes to Caesar or not?" (Luke 20:21-22)Why were there spies asking Jesus this question?
The teachers of the law and the chief priests looked for a way to arrest him immediately, because they knew he had spoken this parable against them. But they were afraid of the people. Keeping a close watch on him, they sent spies, who pretended to be sincere. They hoped to catch Jesus in something he said, so that they might hand him over to the power and authority of the governor. (Luke 20:19-20)
Pretending to be sincere
Thus we find here that the spies 'pretended to be sincere' as they praised Jesus with their question. But because they were feigning sincerity, we also know that their statement is one that would have been acceptable in the eyes of Jesus' students, if not Jesus - should Jesus not have been able to see their hearts. This is communicated by the next verse before his answer:
He saw through their duplicity and said to them... (Luke 20:23)Jesus could see their hearts. This is one of the reasons for Jesus' answer. He understood they were trying to trap him.
Why does Jesus say the money is Caesar's?
So why does Jesus say the money is Caesar's; and what is Jesus referring to when he says to give back "to God what is God's"?
Jesus is discussing living within the material world but not being of the material world. One can conduct one's existence within the parameters of what is required by the material world in a practical manner. But we can still give our heart to the Supreme Being.
This is, in fact, what Jesus is speaking of when he talks about giving back "to God what is God's." He is speaking of our heart. Jesus is speaking about giving our heart to God.
Our heart - our inner being - our spirit-person - belongs to the Supreme Being.
Certainly, everything belongs to the Supreme Being. He is the ultimate Creator of everything, and thus everything inanimate and animate belongs to God.
But at the same time, He designates a separate corner of existence - this material world - to those who want to be independent of Him. This material world - the physical world made up of the temporary forms and names of matter - has been temporarily granted to those who wanted our independence from Him. This is why we can exercise a degree of freedom here within this physical world - and make certain choices - each of which have consequences, good and bad.
Why we can't see God with our physical eyes
The ultimate choice God gives us is the freedom of love. Because love requires freedom, the Supreme Being gives us each the choice to give Him our hearts or not. Those who decide not to, He gives us 'our space' - literally.
This is why we can't see Him through the physical senses and the physical mind. Because those who occupy physical bodies in the material world chose not to give our hearts to Him. So even though He is reachable everywhere and expands Himself within all His creations, we feel apart from Him while we misidentify ourselves as these temporary physical bodies. He is hiding Himself from those who choose not to give Him our hearts.
And because our hearts need Him innately, when we feel apart from Him we still seek Him as we search for love and companionship within the material world. This is why Jesus speaks of giving "back" what is God's.
We can choose to remedy this situation at any time. At any time, we can make the choice to give God our heart. We can make the choice to take refuge in Him, and ask Him to take us back. This will, in effect, be giving back "to God what is God's."