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This plan jumpstarts the economy with the biggest one year tax cut in Wisconsin's history. It does this by eliminating all 2011 property taxes for any property owner who will agree to pay their taxes monthly rather than at the end of the year. This may save the average homeowner more than $4,500 in 2011. 1
Mark Neumann's plan allows property taxpayers to pay $0 in 2011 if they commit to pay their property tax bill every month starting in January 2012.
Mark Neumann's tax cut will be the biggest one year tax cut in Wisconsin history.
There is no business in America that bills their client for a service twelve months after the fact. Yet that is how property taxes are billed in Wisconsin. In Wisconsin, taxes for January of 2010 are due in January 2011. With Mark Neumann's plan, property taxes are billed monthly for those who choose to participate. Participation in the plan gives the property taxpayer a onetime tax cut equal to one year's property taxes.
The typical homeowner in Wisconsin sends a monthly property tax payment to their mortgage lender with their monthly mortgage payment. That means if their taxes are $6,000 for the year they pay $500 in January of 2011 to their mortgage lender, which is held in an escrow account to pay for their 2011 taxes when they become due in January of 2012. By December of 2011 they would have $6,000 in an escrow account with their mortgage lender, their tax bill would come due, and they would pay the municipality the $6,000. The municipality would then spend the 2011 property tax payment ($6,000) at a rate of about $500 per month in 2012. It is important to understand that the municipality needs $500/month from this property taxpayer in order to pay their bills in 2012.
Under this plan the property owner will keep the $6,000 from their 2011 tax escrow account instead of using it to pay their 2011 taxes. Starting in January of 2012, they will send $500/month to the municipality instead of sending it to their mortgage company. The municipality then can pay its bills and the property taxpayer can keep their 2011 property taxes as a tax cut.
Click the diagrams below to enlarge.
Mark Neumann's tax cut plan does not affect any spending or revenue parts of the Wisconsin budget.
Wisconsin taxpayers will save $11 billion in 2011—about $4,500 for the average homeowner—which they will either spend or save. Either option injects cash or capital into the local economy and generates millions in new sales tax revenue and income tax revenue which helps solve the budget shortfall and provide money for additional tax cuts.
Wisconsin's economy is in serious trouble. We paid $3.2 billion in unemployment benefits to more than 550,000 people in 2009. 2 Our largest metropolitan area, Milwaukee, is faring worse than most other cities in America. 3 Milwaukee County has the 2nd highest effective net property tax rate of any county in Wisconsin, which hurts our economy by siphoning money from the taxpayers to the government. 4
Wisconsin property taxes have increased 53% the past 10 years.
Over the past 10 years, property taxes collected by Wisconsin have increased 53%. 5 Madison politicians continually raise property tax rates and levies, 6 which puts an additional burden on Wisconsin's already stretched-thin property owners.
Under Mark Neumann's plan, every property owner can keep 100% of their 2011 property tax. When the property tax bill arrives in December 2011, it can be thrown away! For homeowners that send monthly tax payments to their mortgage company, their mortgage company will cut them a check at the end of the year that they will simply keep. This is a tax cut equal to the sum of all the property taxes paid in Wisconsin for one full year. Neumann expects that more than 90% of the people in Wisconsin will agree to pay their taxes monthly in return for keeping all of their 2011 property taxes.
Mark Neumann's plan is voluntary, but every homeowner and business has a strong incentive to opt-in. The taxpayer must simply commit to pay property taxes every month, instead of every year, starting in January 2012. For those who do not wish to pay their property taxes monthly, nothing will change.
Further, the taxing entities will have to also agree to implement the plan. There will also be significant motivation to do this as their constituents realize they will be able to keep one year's property tax and also as they see the reduced work load through the streamlining of the tax collection and disbursement process.
Similar to Escrow
The majority of homeowners currently escrow their property taxes monthly. Under Mark Neumann's plan, the homeowner will instead send the property tax payment to the municipality instead of their mortgage bank. The plan also works for those who do not escrow their tax payment every month.
Attaches to the Property
Once a property is put into the program it must stay in the program.
Neumann's Plan is voluntary.
If a property owner decides not to keep their 2011 tax payment by agreeing to pay the tax bill every month, they can opt-in to this plan in any future year. Also, if someone buys a new home not in the plan, they can put the home into the plan. The property owner will then begin to pay taxes on a monthly basis starting in January of the following year.
Based on Wisconsin's current budget, the estimated property tax levy for 2010 is $10,747,400,0007 (a 6.35% increase from the 2009 tax levy8. Using the same rate of increase, the 2011 estimated property tax levy will be $11,429,877,868. Under Mark Neumann's plan, one full year's worth of property taxes will be cut.
Granted, not every property owner will want to pay their property tax every month. Below is a chart that shows the 2011 property tax cuts based on the number of property owners who take advantage of Mark Neumann's plan.
|Participants||2011 Tax Cuts|
Mark Neumann's plan will instantly give Wisconsin's economy a much-needed influx of cash and capital: up to $11,429,877,868. Property owners will either save or spend this extra money.
If the Money is Saved
If the tax cuts are saved, it provides the capital for the banks to loan to businesses and homeowners. The new and growing businesses and new homeowners will provide a boost to the economy.
If the Money is Spent
If the tax cuts are spent, local Wisconsin businesses will benefit from the products and services that are purchased. The businesses will be able to expand, hire more employees, and compete in different markets.
Wisconsin competes globally for businesses and the jobs that come with them. Every business looks at its costs in a given location when making the decision to locate there or elsewhere. This significant tax cut will save our businesses money allowing for immediate growth and expansion. It will also indicate to businesses from around the world just how serious we are about cutting taxes and improving our business climate.
"When I think of all the struggling businesses Sue and I
have talked with on Main Streets all across Wisconsin, and then I think about folks spending this
tax cut, I know how beneficial it will be."
- Mark Neumann
The boost to Wisconsin's economy will also provide additional revenue to Wisconsin. This additional revenue can be used to fix the problems caused by dishonest budgeting or even become the base for new tax cuts.
The additional revenue created by new and growing businesses is difficult to quantify, but the sales tax generated when the tax cuts are spent can be easily calculated.9
|Estimated Revenue Generated if...|
|Participants||100% is spent
0% is saved
|75% is spent
25% is saved
|50% is spent
50% is saved
The taxing entity will collect the property tax on a monthly basis instead of the current annual basis. In order to reduce the workload of municipal and county clerks, the monthly property tax payment must be made by an automatic bank transfer.
The State of Wisconsin will create a software application to introduce efficiencies in the property tax paying process, resulting in significant savings in costs and time. The software will streamline mailing tax bills, coordinating with banks, receiving and recording payments, and will work for both property owners who take advantage of this plan and those who don't. The reduction in workload at the municipal level is significant when one considers the current system versus a system working with automatic transfers and recording. The system will also be designed to handle the disbursement to various taxing entities the funds which are collected by a single entity.
The number of delinquent taxpayers will likely decrease. A homeowner making monthly payments is more likely to make the payment than if they simply get a 12 month bill at year end. This is of course why many lending institutions require monthly escrows of taxes. Additionally, delinquent accounts will be caught and dealt with faster, allowing the municipality to make adjustments during the year.
In this example, John is a Wisconsin homeowner paying $6,000 per year in property taxes. He has a mortgage on his house, so he has to send $500 per month ($6,000 / 12 months) with his mortgage payment to cover the year-end tax bill. His lender places the $500 into an escrow account every month, which will be used to pay the $6,000 tax bill at the end of the year.
Current Tax Payment Process
At the end of 2011, John receives his property tax bill. The lender sends the $6,000 escrowed money to John (or directly to the municipality) and he pays the 2011 property tax bill in January of 2012. John then makes a $500 escrow payment to his lender with his January 2012 mortgage payment to start saving up for the 2012 property tax bill which is not due until 2013.
Tax Payments under Mark Neumann's Plan
John decided to opt into Mark Neumann's plan. At the end of 2011, his lender sends him a $6,000 check to pay the 2011 property taxes. However, John no longer owes 2011 property taxes. He puts $3,000 in his local savings account and uses the other $3,000 to buy new appliances for his kitchen. In January 2012, John makes the same $500 property tax payment that he was making to his mortgage lender, except this time it goes to the municipality instead of his lender's escrow account. For John, very little changes, except he now has $6,000 extra to spend or save.
Minimal Impact on Municipalities
The municipality normally gets the $6,000 from John's 2011 property taxes in January of 2012 and spends it out at a rate of about $500/month throughout 2012. Under Mark Neumann's plan, the municipality will receive $500 from John in January 2012, and $500 from John in each following month. The municipality therefore has the money it needs on a monthly basis to pay its bills. At the end of 2012 the property taxes for 2012 will be paid in full since John has been paying them monthly directly to the municipality.
Municipalities that are currently responsible for collecting most of the property taxes in Wisconsin will be instrumental in facilitating the implementation of this plan and the Neumann Administration will be listening
Mark Neumann's plan works for property owners that make multiple payments as well as property owners that do not escrow their property taxes during the year. The plan works for homeowners (who pay 71% of all property taxes) as well as businesses (who pay 19% of all property taxes).10
Owners of rental properties may lower rents with this tax cut, but that will be a market driven decision.
Mark Neumann briefly describes how the tax cut works.
Mark Neumann has over 20 years of experience as a small business owner in the home building and real estate industries. Simple solutions like this have allowed his company to cut spending in order to stay in business and actually be successful in one of the worst real estate markets in recent history.
As a small business owner, Mark Neumann has had to solve many problems that career politicians simply ignore or continually fail at—from cutting spending to curbing health care costs to successful employee negotiations.
It's only natural that Mark Neumann is the person who proposes the largest tax cut in Wisconsin history. When Mark Neumann was in Congress in the 1990's, he was instrumental in balancing the federal budget for the only time in the last generation. The balanced budget allowed them to pass the biggest tax cut in American history.
1 The $4500 savings is based on a home valued at $225,000 and a 20 mill rate.
2 Jake Miller, Benefits Runout Hits Job Seekers, MARSHFIELD NEWS-HERALD, July 6, 2010.
3 See, e.g., Milwaukee Gets Worse for Small Business, The Business Journal of Milwaukee, Jan. 18, 2010 ("Milwaukee dropped to 96th place, from 77th last year, in the 2010 Small Business Vitality
4 Rankings for the 100 Largest Metros"); Metropolitan Area Employment and Unemployment—May 2010, Bureau of Labor Statistics, June 30, 2010 (showing the Milwaukee metropolitan area had a 19 million decrease in its labor force in one year and an 8.2% unemployment rate);
5 Wisconsin BlueBook 2009-2010, at 832 ("Lafayette and Milwaukee counties ($21.85 and $21.19, respectively, per $1,000) had the highest effective (full value equalized) net tax rate . . . compared to the state average of $17.23").
6 In 2001, Wisconsin collected $6,604,531,364 in property taxes. Town, Village, and City Taxes 2000, Wisconsin Department of Revenue: Division of State and Local Finance: Bureau of Property Tax, http://www.revenue.wi.gov/pubs/slf/tvc00.pdf (Table II). In 2010, Wisconsin collected $10,105,672,877 in property taxes. Town, Village, and City Taxes 2009, Wisconsin Department of Revenue: Division of State and Local Finance: Bureau of Property Tax, http://www.revenue.wi.gov/pubs/slf/tvc09.pdf (Table II).
7 See, e.g., Bob Lang, Assembly Bill 75: Property Tax Estimates, Legislative Fiscal Bureau, Apr. 8, 2009, http://www.legis.state.wi.us/lfb/Misc/2009_04_08_WI%20Leg_property%20tax%20estimates.pdf ("estimated changes in net school tax levies would be 7.4% in 2009(10) and 7.9% in 2010(11)").
8 Bob Lang, Property Tax Estimates: Governor and 2009 Act 28, Legislative Fiscal Bureau at 3, July 6, 2009, http://www.legis.state.wi.us/lfb/2009-11Budget/Act%2028/2009_07_06Property%20Tax%20Estimates%20Act%2028.pdf.
9 The 2009 property tax levy (collected in 2010) was $10,105,672,877. Town, Village, and City Taxes—2009, Wisconsin Department of Revenue: Division of State and Local Finance: Bureau of Property Tax, http://www.revenue.wi.gov/pubs/slf/tvc09.pdf (Table II).
10 Wisconsin Sales Tax to the State is 5%. Tax Rates, Department of Revenue, http://www.revenue.wi.gov/faqs/pcs/taxrates.html (showing the state sales tax). The data in the chart assumes that the economic benefit from saving the money will generate 3% of the money saved in revenues to the government. Residual economic benefits from spending and saving the property tax cut will also generate additional tax revenues.
11 Wisconsin BlueBook 2009-2010, at 832 ("The share of property taxes paid by residential taxpayers (71.4%) continues to increase. Commercial taxpayers pay 18.9%, and the share paid by manufacturing (2.7%) continues to decline.").
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