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Spending and Taxes

Mark Neumann's Plan

1. Cut spending. As Governor, Mark will limit government spending growth to 1% less than the rate of inflation.
2. Cut taxes. The gap between tax revenue and lower spending levels makes tax cuts possible. Mark will start by repealing Governor Doyle's tax hikes and combined reporting.
3. People keep more of their own money. When people keep more of their own money, they either save or spend, which helps Wisconsin's economy grow.
4. Jobs are created. When people control their money instead of government, they make decisions that grow Wisconsin's economy — creating more Wisconsin jobs.

It is important to understand that Wisconsin is competing for employers and jobs not only with other states, but with other countries. We need to make sure our tax rates are competitive enough to keep, create, and attract jobs. In order to make our tax rates more attractive we must first control spending.

"As Congressman from Wisconsin's First District (1994–1998), Mark was well known as a fiscal and social conservative. As Congressman his primary focus was on budgetary matters and Mark was uncompromising when it came to deficit spending and balanced budgets. This is exactly why Wisconsin needs Mark Neumann as Governor" — Mike Mears, Concerned Women for America Legislative Action Committee, 1999.

Start by Controlling Spending

Conservatives realize that the size of government can be judged by how much money it spends. A big government spends a lot of money while a small government spends much less. We must first control spending before we can lower taxes, pay our debts, or create a rainy-day fund. Wisconsin's Constitution requires a balanced budget. It follows that every dollar spent by Madison requires a dollar from your pockets. One way or another, Wisconsinites have to pay for all government spending; through property taxes, sales taxes, registration fees, permits, or any other payment to Madison. We can't escape this reality!

For more than a generation in Wisconsin, government spending has grown faster than revenue. To hide this, the politicians have used fuzzy accounting tricks, federal stimulus money, and budget shenanigans to make the budget look balanced. The Neumann administration will return the government to honest accounting practices. Mark will also start shrinking the size of government by limiting the growth rate of spending to 1% less than the rate of inflation. This will dramatically improve the tax rates and spending habits in Wisconsin without creating massive disruptions in the lives of Wisconsin citizens.

Mark Neumann is a small business owner. In these tough times families and businesses across Wisconsin have to tighten their belts and that's what government needs to do, too.

How it Works

Revenues to the state typically grow at the rate of inflation. This is easy to understand: when you get a raise equal to the rate of inflation, your employer is helping you keep up with rising prices. You then send some of your raise to Madison.

Similarly, tax revenues also increase by the rate of real growth in the economy. This also is easy to understand: as real jobs are created to fuel the real growth, the employees and employers send more money to Madison.

It follows that revenues will grow by the sum of inflation and real growth in the economy. While no one can guarantee what these numbers will actually be, conservative estimates assume 3% inflation and 2% real economic growth per year. This would create about a 5% increase in tax revenues for the state. Mark's plan limits spending growth to 1% less than inflation — or spending growth of 2% using the above example.

Let's look at an example. Assume this year Wisconsin collects $100 in taxes. The following year there are no changes to tax laws, Wisconsin's economy grows by 2%, and inflation rises by 3%. With these numbers, taxes paid to the government the following year would grow by 5%. Therefore, Wisconsin would collect $105 in taxes the following year. Mark's plan, which limits spending growth to 1% less than inflation, would limit spending the following year to $102 instead of spending the whole $105. This is a real reduction in government spending growth that amounts to a real reduction in the size of government.

Career Politicians vs. Private Sector Patriots

While in Congress (1995–1999), Mark Neumann saw firsthand the pressures that politicians face to spend taxpayers' money. In order to get re-elected or promoted, career politicians think they have to spend tax dollars on pork projects or special programs. This is essentially buying votes — the more government money politicians give to the voters, the happier the voters will be and the more likely the politicians will keep their jobs.

It's no surprise that both Republicans and Democrats are known as big spenders when either controls government. The trouble is that someone always has to pay for government spending — and that someone is you. Remember that every time a politician brags about a project or program, the money used was taken from your family.

Mark faced those same pressures in Washington, but stood by his convictions. He realized that if he put his own pork into a spending bill he would lose all credibility when fighting against other politician's pork. He refused to give in and fought against spending so strongly that his own party leadership kicked him off a Congressional committee because he refused to vote for Republican spending bills.

Mark Neumann has been nationally recognized as a principled and relentless fighter against government spending. Here are a few of the awards and organizations that recognized Mark's record: Council of Citizens Against Government Waste Taxpayer Superhero Award, Americans for Tax Reform Friend of the Taxpayer Award, National Tax Limitation Committee Tax Fighter Award, National Taxpayers Union Taxpayers' Friend Award, Watchdogs of the Treasury Golden Bulldog Award.

In order to combat the pressures career politicians face to spend your money like it's their own, Mark Neumann has committed to several government reforms such as term limits and the 'five day rule,' a transparency reform requiring all legislation to be posted online 5 full days before a vote. But the solution really lies with you — the voter. We must commit to no longer electing career politicians who have a history of raising spending every year. Click here to compare the actual spending records of the top candidates for Governor of Wisconsin this year.

As a private business owner who had to meet a payroll during one of the worst economic times of our generation, Mark Neumann reduced his business expenditures significantly while maintaining the value and services necessary to stay in business. At the same time, career politicians have irresponsibly increased spending. The choice is clear: Mark Neumann for Governor!

Cut Taxes

Once we understand how government spending negatively affects all other fiscal aspects of government, it's easy to see that Mark Neumann's plan to cut spending directly feeds into his plan to cut taxes by 24% over 8 years.

In the Spending section above, we used an example of 3% inflation and 2% real growth in the economy to create tax revenue growth of 5%. We showed that — if we cap spending at 1% less than the rate of inflation — tax revenues grow by 3% more than spending each year. Under Mark's plan, that 3% gap can and will be used to cut taxes. Over eight years this accumulates to a 24% tax reduction, as shown in the chart to the right.

Begin by Repealing Doyle's Tax Increases

Mark's plan includes repealing Governor Doyle's tax increases. Under Governor Doyle's policies, Wisconsin's economy has faltered. Doyle's tax increases, regulations, and red-tape made Wisconsin's economic downturn worse.

Here are a few examples of specific Doyle taxes that Mark will roll back:

• Income tax hikes ¹
• Capital gains tax hikes ²
• Property tax hikes ³
• Cigarette taxes ⁴
• Digital download tax ⁵
• Telephone line tax ⁶

Combined Reporting

Mark opposes extra and arbitrary taxes such as Wisconsin's combined reporting rules. Combined reporting requires related businesses to pay Wisconsin taxes if they are located in Wisconsin and have operations outside of Wisconsin. In other words, our state government increases taxes on Wisconsin employers who have plants and businesses around America and headquarters in Wisconsin. Combined reporting only encourages employers to leave Wisconsin entirely!

Combined reporting also adds expensive administrative costs. Wading through this confusing legislation means employers have to spend more money on accountants in addition to paying increased taxes.

Taxes like combined reporting are precisely the problem in Wisconsin. It is now well-known that companies like Harley-Davidson and MillerCoors are being punished by combined reporting. Mark will always oppose overly complicated tax codes and regulations that no one — especially those creating and enforcing them — can understand. Wisconsin does not need more taxes, it needs less taxes.

Lower taxes encourage businesses to grow — creating the economic growth that increases tax revenue to the state. Even with lower tax rates, there will be more tax revenue as businesses keep, create, or relocate to Wisconsin. This increased revenue can facilitate further tax cuts.

A Proven Plan

Mark Neumann's plan to cap the rate of spending growth to 1% less than the rate of inflation is very similar to the plan he took to Congress in 1995. The results were a balanced budget, repayment of debt, the largest tax cut in history, and the creation of literally millions of jobs. This historical chart shows that the federal budget was in balance only for a short time over the last 40 years — and it is no coincidence that this occurred while Mark Neumann served in Congress.

Here is what George Magazine had to say about Mark's influence in the battle of the balanced budget:

"Among the eight most influential lawmakers in shaping budget policy: Elected to the zealous class of 1994, [Mark Neumann] can speak for about 25 GOP hard-liners. Now that the deficit could foreseeably be brought under control, he wants to start slaying the other fiscal monster: our $5.3 trillion national debt."
- George Magazine, July 1997

You Keep More of Your Own Money

The goal of cutting taxes is for you to keep more of your own money. It must be understood that individuals making real choices about their economic future is the driving force of prosperity. Private companies are more responsive to consumers than the government, and individuals are better at recognizing people's preferences than bureaucracies.

When you keep more of your money, you do one of two things: you save more, or you spend more.

Savings are vital to an economy. Saved money is economic lifeblood. It is the source of capital and credit employers need to expand or get up and running. More savings encourages investment in local businesses and small start-ups. It also allows lenders to extend loans for new businesses to create more jobs. It is important to have a solid savings base so that money is available to support business activity. This is what keeps and creates jobs.

With more money in your pocket, you will also spend more. Spending by consumers such as you has vastly increased the consumer goods sector (the final products we all purchase as consumers) of our economy over the last couple of decades. Cutting the portion of your paycheck that goes to Madison directly increases your monthly spending budget — and leads to additional manufacturing or service jobs.

'Stimulus' and Bailouts

'Stimulus' and bailouts are harmful to the economy. We cannot fix inflation and debt with more inflation and debt. "Free Money" provided to companies from the government comes directly from your pocketbook. It encourages irresponsible behavior by businesses and individuals who do not balance their budgets. Stimulus spending is just more debt that we are piling on our children and grandchildren.

'Stimulus' spending must eventually be taken in taxes. The stimulus money is spent on what politicians think is valuable, not what you think is valuable. This type of government spending is even more inefficient than regular government spending.

Bailouts take taxpayer money and give it to those who have been inefficient and irresponsible. Companies that know they will be bailed out with taxpayers' money are more likely to be irresponsible than companies who know they will not be bailed out. If banks and car companies cannot survive on their own merit, the government should not take money from an innocent third party — you, the taxpayer — to prop them up.

As a small business owner Mark has had to cut expenditures during tough times, and expects the government to do the same. When times are tough, it is especially important that you are allowed to keep more of your own money. It is especially important that employers have the resources to keep their doors open and to grow.

The dilemma: Wisconsin tax payers send money to the federal government. In addition to this money the federal government borrows lots more money that our children and grandchildren right here in Wisconsin will ultimately be responsible to repay and also be responsible to pay the interest on.

The federal government then decides to send some of that money out in an ill advised stimulus program. Should Wisconsin refuse to take the stimulus money, then we would be in a competitive disadvantage with states with which we compete in attracting and keeping jobs. Also our children would unfairly be bearing the cost of other state excessive spending.

Therefore as governor, our stimulus policy shall be that should there be another ill advised stimulus plan from the federal government, Wisconsin will take every dollar it can get, but will craft a tax cut plan and/or Wisconsin debt reduction plan in an amount equal to the dollars received. The tax cuts shall be for the period of time of the stimulus money.

This will make us even more competitive in attracting jobs. It also recognizes that the only real way to "stimulate" an economy is to cut taxes and let people keep more of their own money. The cut taxes must be tempered by an equal decrease in government spending. We will no longer heap the burden of our excesses on future generations.

Jobs Are Created

With spending under control and taxes lowered significantly, Wisconsin will immediately become more attractive for employers and entrepreneurs. Wisconsin needs a competitive advantage in the area of taxation (as well as regulation and the best-educated workforce) if we want to attract jobs. Employers will want to move here, and the companies already based here will want to stay if their overhead costs will be lower than in other states. Jobs will be created and retained. We cannot talk about saving and creating jobs in our state if we refuse to make the necessary changes to make Wisconsin attractive for employers.

Mark's goal is not limited to making Wisconsin the best place to do business in our region, or even in our country. The reality is that we are competing in the global economy, and Mark's plan is to make Wisconsin the best place in the world to do business.

As a small business owner, Mark understands how high taxes discourage business growth. High taxes also increase your shopping costs as businesses must raise prices to pay additional taxes. Taxes must be kept to a minimum to maximize job growth and reduce costs for businesses and consumers alike.

Keeping Focus

Mark's focus will be on reducing taxes to attract jobs. It will take discipline to actually use the 3% gap for tax cuts rather than additional spending, but it is necessary to create a growing economy that is creating more jobs. The focus must remain on our children and grandchildren and whether or not they will have opportunities in Wisconsin rather than another state or country.

This plan must be tempered by the reality of the present administration. Right now, tax revenues do not actually equal government spending because of budget tricks. There are many examples illustrating how Wisconsin does not really have a balanced budget.

A prime example is the 'stimulus' money the state received to patch holes in the current budget. Given the debt levels of the federal government it is highly unlikely that this money will be available for the next budget cycle. This sort of budgeting creates perpetual debt, which is unfair and unacceptable.

Another common trick is to take money collected for one purpose and use it for something entirely different. This only creates future shortfalls. An example: money collected from the state gas tax is supposed to be spent on infrastructure, but instead it has been spent on something else. Now when the state needs to pay for roads it must go further into debt. These gimmicks and short-term fixes must be corrected before any true tax reduction plan can be put into place.

The Stakes

High taxes affect more areas than some realize. The more taxes that companies have to pay, the less money they have for wages, benefits, expansion, and a host of other costs. If taxes are high enough, companies and the jobs they provide will leave Wisconsin for states with lower taxes.

The more you pay in taxes the less you have for savings and investment or spending. The politicians need to understand that money taken in taxes cannot, by definition, be used to make our economy better.

We must understand that employers leave our state because it is simply too expensive to stay in business here.

Wisconsin's Future

Perpetual debt is unfair. It allows the current generation to live beyond their means at the expense of future taxpayers. Our country and our state should be a land of opportunity. We should not be asking our children and grandchildren to shoulder the burden of our excesses. Responsible government provides essential services without punishing future generations.

Where our children and grandchildren find opportunity will determine where they raise their families. Reducing taxes in our great state is one important step in making Wisconsin globally competitive for the jobs of the future. These are the jobs that will allow future generations to raise their families here in Wisconsin rather than in China, India, or Mexico. This also means that the businesses that are already here in Wisconsin will be more likely to stay and expand here at home. This brings job security to our present workforce.

In summary, it is necessary to lower spending and cut taxes to make Wisconsin globally competitive for the jobs of both today and tomorrow.

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