No Money Down

Mark Neumann's latest scheme would allow homeowners to spend the money in their 2011 escrow accounts and then make 12 monthly property tax payments the following year. After 2012, homeowners could go back to escrowing their property taxes or continue making monthly payments to municipalities.

Neumann calls it the biggest one-year tax cut in state history, saving homeowners about $4,500 each. The truth is Neumann's plan wouldn't save homeowners a dime. It would simply put off the payments, spreading them out over 12 months. Arguably, it would cost tax payers more as local governments borrow money to cover the funds lost through Neumann's scheme.

Neumann also fails to address the fact that escrow checks are generally made payable to the municipality and the homeowner, making it impossible for the homeowner to just cash the check and use it to stimulate the economy.

But the biggest problem with Neumann's installment plan is that not everyone is responsible enough to set aside the monthly payment and make it themselves. That’s why most banks won't allow homeowners to opt out of escrowing until they have a certain amount of equity in their homes. This is one of the ways lenders manage their risk.

And what happens when homeowners realize that they can't afford to pay their property taxes and make their monthly mortgage payments? The same thing that happened when people were given government backed loans to purchase homes they could never afford on their own: the rest of us will have to pick up the tab.

Not surprisingly, Neumann was all in on that scheme too.

I get a headache just thinking about the added administrative burden on government to collect the monthly payments, and a migraine when I contemplate Neumann’s idea for a new state software program to automate payments.

Maybe Neumann should stop worrying about how the rest of us pay our taxes and focus on paying his own taxes in full and on time.