I get it! Rethinking Mark Neumann’s tax plan

Republican gubernatorial candidate Mark Neumann’s tax proposal finally clicked last night. He said something along the lines of:

If you choose, you will never pay your 2011 taxes.

And the light bulb went off for me.

Yes, absolutely, for those who choose to keep their money, they can save on next year’s taxes. I’ll use some numbers as an example.

Say you pay $10,000 a year in property taxes at the end of December for 2010. That gives you the opportunity to take $10,000 off of your itemized taxes. A $10,000 deduction will net various amounts based on your income, but it’s not like a credit – it will ever net you $10,000.

However, if you choose to take advantage of the Neumann plan, you can save $10,000 actual dollars for 2011.

I know we’d all spend it differently, but for me, that’s a month of travel.

For Harley-Davidson? They are talking about moving 1800 jobs out of Wisconsin. Would they reconsider if they were given a tax holiday for 2011? That has to be an incredible savings for a business with so many facilities in Wisconsin.

Let me add, for those of you who keep score, I was wrong on this one. I’ll beg leniency as I’m not alone in my initial misunderstanding. A woman in Kenosha is putting up 100 Mark Neumann signs in that area. She eventually got it too, but she’d made a bet. Deborah is now arranging for sign locations in that area.

I think I’d like a woman so true to her word.

To make this a bit more personal, I had a similar statement in my mayoral campaign. I’d seen the numbers and knew Brookfield held (and still has!) incredible reserves from overtaxing for a decade. No one believed me. While I knew the numbers worked absolutely, there were plenty who screamed I wanted to trash the city’s AAA bond ranking, etc.

While I don’t absolutely prefer the phrase tax cut, I readily admit the Neumann plan will provide a Wisconsin property owner tax savings the chance to hang on to their money for an extra year.

That’s a whole different story than Walker’s claim of a tax shift or worse, this guy’s disingenuous headline of a tax scam. Judging by the lack of comments, I’d say there’s no Real Debate on his claim.

Comments

  1. I’m just curious–and I didn’t read this part of his “book” so maybe he has some brilliant plan here–how will local governments, school districts, and so on make up for the lost revenue?

  2. There’s no lost revenue, Folkbum. The local communities have been using the cash flow for years to fund other things off budget. In Brookfield, they loan the extra to Elmbrook school district. They make really good money off floating that income.

    There’s no Wisconsin municipality that I know of in dire straights. The caps have been very generous over the years.

  3. So let’s pretend Neumann’s plan is in place and Brookfield loses that slush revenue. No biggie for Brookfield.

    But what about Elmbrook? They will lose not just the loan from Brookfield, but also some share of property tax revenue. And if the full property tax revenue was not enough to run comfortably–seeing as how they borrowed from Brookfield every year–what happens when they have to operate at less than the full property tax revenue and without a loan?

    I know school districts better than I know municipalities, which may be why I see this as a more dangerous plan than you do. There are dozens of districts across the state for whom the majority of their per-student funding is from property tax, and hundreds more where the property tax is the single largest revenue item, if not a majority. Take Nicolet, to pick a local example. They raise more per student in property tax revenue than Milwaukee spends total per student. How will Nicolet make that up?

  4. No, that is not an accurate statement, folkbum. No one is risking a loss of revenue. The school might still borrow from the city’s generous reserves to provide there temporary cash flow, or they may borrow from someone else like they did in the past. That second paragraph flat gets it wrong.

    It’s not dangerous, and it is optional. There is no loss of revenue like you try to argue. I guess I’d ask that you understand it better before you continue to argue the set up. I know it doesn’t break your heart to confuse voters with inaccurate info on this one, but I rather think you’re one of the good guys who’d prefer to be working with the facts.

  5. Well explained, Cindy! My husband and I went ’round and ’round on this because he wasn’t getting it. I contend it is a matter of the word choice, as you explain –tax savings vs tax cut. I may have finally gotten through to my math-teaching husband when I told him that to ME 3.14 = Pi. To him it is 3.1415926535 plus a few hundred-thousand more numbers. Mark’s plan feels like a tax cut to people who choose to use it so it is. They have more disposable income to dispose of.

  6. But Cindy, if I heard Neumann correctly in his debate–and if I understand you correctly, there will be some number, probably a large number, of people who never pay their 2011 property taxes. Revenue will go down. Period.

    Indeed, when Walker accused Neumann of just delaying tax payments, Neumann reiterated that it would really be true that people who wanted it could just not pay a year’s taxes. That lost revenue will seriously affect a lit of local governments.

  7. Folkbum, this is where understanding the calendar of municipalities counts. No, revenue WILL NOT GO DOWN. (I screamed because you need to get it.) It’s simply going to change the current revenue collection arrangement and allow folks to hang on to their own money a little while longer if they so choose.

    You need to fully understand it if you’re going to keep talking about it. It’s unfair to get it wrong but pretend you’re right.

  8. Cindy, the plan is neither a tax cut nor a tax shift. Both candidates have it wrong. I do agree with you that there is no loss of revenue. What changes is the timing of the receipt of the property tax revenue. The statement you highlight is also misleading. What will happen is the timing as to when a person pays their December 2011 tax bill. Some could pay the bill in December 2011, some could use existing municipal methods to pay those taxes in installments into 2012 or some could pay monthly throughout 2012. In any event they are paying their December 2011 bill. In December 2012 they would receive a new bill.
    I agree that if someone saved in anticipation of the December 2011 bill they have the option to use the money for other purposes if they choose to pay monthly in 2012. However that does not represent a tax cut and they still have to pay the December 2011 bill.

  9. “The statement you highlight is misleading.”

    Please give me a chance to correct my work and point to the specific statement.

    So can we agree to these points:

    1) There is no loss of revenue to school districts, the state, or the municipalities.
    2) You may choose to hang on to your money a year longer under the Neumann plan.

    Oh, and I may see what you mean. I’ll make a change. Let me know.

  10. I’m still not seeing it. I mean, I get that if in December 2011 there is a massive chunk of money that does not come in, there will be a surprise bonus of funds dropping in monthly starting in January. But the fact remains that if some portion of taxpayers–20%? 50%?–never pay their 2011 property tax, there will be municipalities all over the state who face holes or desperately spend the next however many years playing catch- up or pushing debt obligations further into the future.

    Plus given that levy rates tend to be set in October or November, how will people know in the previous January how much to pay?

    To be clear, if some republican is bound to win this fall I would far rather it be Neumann. But this plan simply makes holes in budgets that are for the most part already tight. I just don’t see how that makes any sense.

  11. They pay their property tax. The tax is paid (oh goodness I hope I get this right) one month in advance instead of one year in advance. The municipalities and schools are still funded appropriately.

    In December 2010 municipalities will collect to fund the 2011 budget year. All that money gets spent in 2011.

    There is an option to not pay anything in December of 2011, which funds the 2012 year, and instead pay each month for 2012, which funds 2012.

    Does that help?

  12. Except that budget years run July to June, not January to December. Municipalities and districts count on money collected in December to cover money spent in the preceding months. This plan is either going to cause a one-year huge drop in revenue for everybody or a whole lot of deficit spending and pushing obligations way into the future. However you try to spin it, the plan removes an entire year’s worth of revenue from local government’s revenue streams.

  13. No, I believe you have that wrong. They do not collect to cover the preceding months. They collect to cover the upcoming months. There is extra time built into the current arrangement. You need to check that out, but I’m pretty sure my time on the city council will bear my statement correct.

    This plan does not remove revenue. The plan changes the municipality’s cash flow advance, but it does NOT remove revenue. You need to thoroughly understand it before you draw a line in the sand.

  14. BrkfldDad says:

    Okay, I’ve read the chapter in the book. There’s no loss in collected revenue, but given Mark’s predilection to bang the business drum, I have two questions and one concern:
    1. Cash flow. Cities, nor businesses, see 1/12 of their bills every month. It fluctuates, and I would suspect sometimes significantly based on project awards, purchases, etc… The prepayment of taxes allows for a cash reserve to address the positive/negatives of the cash flow. A city like Brookfield, with a cash reserve all ready, may be okay, but what about other municipalities? He doesn’t address that at all.
    2. Interest/Positive cash flow. The upfront payment must result is some net gain for a municipality. I used to work with a firm that was nearly a 0% margin business. But we played with Net Terms on receivables and payables, thereby creating a wildly positive cash flow, that made us a nice margin by year’s end. Do some municipalities rely on the same to create extra income during the fiscal year? The 1/12 payment strategy doesn’t allow for that anymore.
    3. I hate that this has to be approved city by city, etc… I can all ready see the delay in enactment, the taxpayer uproar if not enacted, etc… It really takes it out of the Governor/Legislature’s hands.

  15. Yes, municipal cashflow will be affected. That will not be the way it’s always been done, but I don’t think it will be bad, nor do I think it will cost taxpayers.

    Yes, the municipalities are making money off the current cashflow arrangement. In Brookfield, that revenue never went back to taxpayers, it was stashed. So, we’re back to the idea of who should get to make money with your money, the city, or you?

    Yes, that seems burdensome, but here’s what I think will happen: Cities tied to industry for their tax base will easily pass the plan, and everyone else will walk away. I do think it’s geared to keep industry in Wisconsin even though it’s being sold for everyone.

    It might pass in Brookfield, too, since many in our population own their homes without a mortgage.

    Bdad – thanks for taking the time to look into it. I think you rock. 🙂

  16. Cindy is correct. The tax levy for schools which has to be set by law by November 1 does not look back. I do not have time to now to give an example. Will try to do to later. The statement more properly should be you would not have to make a property tax payment in 2011.
    People always get confused about a school budget which has to be passed by June 30 and the property tax levy which has to be set by the following November 1.

  17. This is the statement in Neumann’s plan “In Wisconsin, taxes for January of 2010 are due in January 2011.” that gets them into trouble. If one were to look at the cash on hand for a school district in January or a municipality in December one would find a value that would be very low. The taxing body needs the influx of dollars generated by the December tax bills to pay the current expenses due in January. These revenues are not covering the expenses from the prior January.

  18. So we’re talking about one tight month if everyone took to paying under Neumann’s plan?

  19. Sounds great, now all you have to do is get your mortgage company on board.

    Unless you have a fair amount of equity in your property, good luck getting your lender to waive their escrow requirements.

    The 14.4% of Wisconsin homeowners who have negative equity in their properties would certainly have difficulty convincing their lenders to waive escrow.

    http://www.npr.org/templates/story/story.php?storyId=129424619

    Sounds like a good deal for some homeowners, but not for all.

  20. This is it?!?! This is his big plan. Well whoopdedoo. So Neumann allows taxpayers to keep the cash flow for a year rather than the gov’t. Sure that’s a good thing. I’d like to earn the interest on my money instead of the gov’t. But that’s peanuts vs. the total tax bill. We all still end up paying the same amount in property taxes. It’s a one year benefit and then it’s gone. If that’s the best he can do, then I’m very disappointed. REAL tax reform means defeating the Dems attempts at combined reporting (from a corp standpoint) and cutting marginal income tax rates.

  21. I will correct myself before Cindy does. Yes, for those who escrow there is a real one-time benefit in terms of $ saved. However, it does nothing for the thousands of houselholds who don’t escrow: 1) most anyone with more than 20% equity in their home and who asked their mortgage firm not to escrow, 2) ALL of those who’ve paid off their mortgages (ie most seniors) and 3) the vast majority of businesses (ie Harley-Davidson whom you cite). For them, their 2011 tax bill is just spread out over the ensuing 12 months. This is just an arbitrary tax holiday, not a tax CUT as Neumann claims, that will give a temporary boost to consumer spending (for some) and have no big benefit to the WI economy. I would have expected this from Tom Barrett.

  22. Steve. To someone who is living month to month in this economy, a plan like this, where a home owner can keep his or her own cash for cash flow or purchases, it IS a big plan. Your sarcasm aside, this is just ONE part of a plan for improvement of state government. It is ONE tax idea. Thankfully Neumann actually has ideas not just talking points. Walker is a one-trick pony. He tells department heads to cut their budgets and that is the total skill set for his executive leadership. He has nuttin’ else. It would be one thing if this tax plan were Neumann’s ONLY idea – it is not. His book is full of solutions he has put forth, cover to cover. (Have your read any of it?) Tell me a few of Walker’s original new ideas and solutions, Steve.

  23. The Lorax says:

    RL — I’m just curious about this trick you claim Walker has. I’ve yet to see even one!

  24. TheL. Wait, wait! I thought of another one….the Pretend I am Starting at a Baseline Budget Show. You know the one where he takes the increased budget from the previous year, creates a grand illusion of opposition and ShaZam! the budget passes anyhow. Then next year he starts with the increased budget AGAIN, and so on, and so on…… THAT is how you get a 35% increase in spending during his tenure. Funny how he ‘doesn’t get’ that math, either. But, now that I think of it, it is less of a trick, better described as a scam. Like the shell game of a flim-flam artist, Walker has perfected his own method of this faster-than-the-naked-eye budget game. Problem is people are buying it and actually may plan to vote for this guy. I won’t insult ponies again. Their tricks don’t tank the taxpayers.

  25. TheLorax. Yes, I’ve read much of Neumann’s stuff and I like many of his ideas. However, this is not a very impressive tax plan as it will do very little for the economy. Yes, the one-time saving for SOME Wisconsinites will be significant. But for all those who don’t escrow it would be almost zero. That would included most businesses, most seniors (since they’ve paid off their mortgage) and families with more than 25% equity in their home. Yet Neumann dishonestly claims that $11B in property taxes could be saved. He ignores the fact I cite above. Again, this is the sort of cherry-picking favs that I expect from Dems. How about helping all Wisconsinites…yes as Walker has proposed…by cutting marginal income tax rates.

  26. I have a question that anyone can answer. What savings will occur for any Wisconsin property tax payer from the Neumann plan?

  27. Somehow this group is failing to recognize the payment change is but one part of a comprehensive plan to reduce taxes. There’s also a plan to manage spending below inflation which will keep taxes down. Be sure to read about the big picture from Neumann’s website.

    It’s wrong to say this is all there is to it.

  28. Cindy, I am glad you dropped in to point that out. I just got to a computer to add my same observation. Steve – when you said “Again, this is the sort of cherry-picking favs that I expect from Dems.” I thought to myself, “That is just what he is doing, cherry-picking to go negative on one point from Neumann’s entire book.” It is NOT a stand-alone concept. To reiterate Cindy’s post…the property tax savings is a part of a whole. One part. It is unfair and disingenuous to start from any other premise. If you want someone who suggests governance by slogans, i.e. ‘Tax cuts for all!’ without such a comprehensive approach as Neumann presents, you are only fooling yourself as to the reality of that happening. Neumann has the intellect and guts to put his plan forward regardless of the comprehension of those who are reading it and hoping to take shots and piecemeal components of the entire approach. Show me another candidate who is willing to put his plan where his sound-bite is.

    And, this will have a positive impact on those people living month to month, paycheck to paycheck. In real life, will have more disposable income to dispose of. Maybe that is not 100% of homeowners, but it 100% of homeowners who qualify that will be thankful for control of their own money.

  29. RL, I think you protest too much. My criticism is simple: a one-time tax holiday will have little impact on the Wisconsin economy and this proposal will exclude many Wisconsinites including almost all businesses. So yes, it better be one part of a bigger plan…and if it is I’ll be all for it. While you claim Walker is vague and that I’m a cherry-picker, the reality is that neither you nor Neumann’s book detail any of his other proposals. What else was I supposed to comment on???? Finally, to say that some will benefit is not a very strong argument. The same could be said for Obama’s stimulus and healthcare reform. Is there a broad, positive, lasting effect on Wisconsin?…that’s the question.

  30. Steve, I was pointing out how you were doing exactly what you complained about. Hardly an avalanche of protestations. Are you a Walker supporter?

    My point is still the same, as part of the whole, it is a great opportunity for those who can and choose to participate. I think you underestimate the economic impact, but if you can’t figure that out, it is too much to go in to here.

    Did you read Neumann’s book? I don’t expect a full governmental exegesis from him in a preliminary format. I do respect the ideas Neumann has put forth, and for all your defense of Walker, what I find from him on his website are only broad view policy points that read like an eight-grader lifted them from civics class.

    Nice try, but Neumann’s book is short and to the point, nothing at all like Obama’s stuff. If you think that is a comparison, you need a course in logic.

    And to you last question, Yes.

  31. I am a proud Walker supporter. I’ve known him for more than 20 years and have found him to be a man of integrity and principle. Your negative assessments do not match the man or the Milwaukee County Exec I’ve known. I’ve also known Mark Neumann for the better part of 20 years. I worked doors for him when he ran for Congress and again when he ran against Russ Feingold. However, the nasty campaign he has run this time has been a big disappointment to me and has made this an easy choice. Temperment is a key aspect of leadership. The vitriol and lack of facts with which you responded to my straight-up critique of the merits of this, the central plank of his tax plan, make it easy for me to see why you’re supporting him.

    P.S. Yes, I already indicated that I read his book. I even said that I liked many of the ideas. Why wouldn’t I? He’s a conservative as am I. You should read people’s comments before you bash them.

  32. Steve, ahah! Such declaration is always appreciated at the beginning of a long argument.

    We don’t share the same observation, that’s for sure. The day the building panel fell off the garage I watched Scott Walker shrink from a press conference in hopes of not being interviewed. He later came back alone to make up for his disappearance. I knew right then the man was not one to lead. It’s nice you think otherwise, but the rest of us don’t get your kind of access. True, we might be missing something, but an add with Walker wering boxing gloves isn’t going to make it up.

    And Steve, if you describe this discussion as “vitrol” you really need to consider another hobby. This is as tame a conversation as I’ve seen regarding the candidates.

  33. Hey, Steve. You confirmed my suspicion of your allegiance as your comments seemed thinly veiled in objectivity, yet indicated an true dedication to Walker.

    I didn’t think I was bashing you unfairly, I just was pointing out your inconsistencies. I only found reference to you reading the tax part of Mark’s book, so I didn’t know if you had read the entire book, that is why I asked a simple question. Sorry if that annoyed you. My response was hardly vitriolic. I’m not sure what facts you think I was missing. But now that I understand your passion for Walker, I won’t try to explain my support for Neumann, it isn’t worth the effort and you’ll not see my perspective; that is OK with me, no hard feelings.

    Several years ago, I met Walker and his wife at a business breakfast meeting, and what I can say about him is he seemed like just an OK guy. Frankly, there was nothing that impressed me about him at that time. But, he did seem ‘nice’ enough. Now, watching him campaign and his defensive response to the many MC scandals as they hit the news, I personally think he and his supporters are quite negative in a back-handed way. On numerous occasions, I’ve heard Walker’s skin-crawling snarky comments about Mark Neumann to his pal McKenna. The Walker supporters who frequent Neumann’s facebook site (they seem to descend in droves after each Walker scandal) are the divisive folks.

    I’ve never seen or heard that type of behavior from Neumann. I don’t considered Neumann’s pointing out factual information on Walker’s mismanagement of Milwaukee to be ‘nasty campaigning’, but doing what a good opponent should do, define differences. That is what Wisconsin voters need and want.

    Again, sorry if you were feeling bashed by me, I thought I was just clarifying inconsistencies. At least we can agree on both liking many of Mark Neumann’s ideas.