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Robert M. La Follette
School of Public Affairs
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3 annual property tax payments reduce delinquency

Property owners are less likely to be late with their tax payments if they make three installment payments a year instead of two, according to a new analysis from the La Follette School of Public Affairs at the University of Wisconsin–Madison.

The delinquency rate drops by about a third if the number of payments is increased from two to three, economist Andrew Reschovsky and 2011 alum Paul Waldhart find through a statistical analysis of data from Wisconsin municipalities for 2005-2009.

However, Reschovsky says, more than three installments does not lead to a statistically significant reduction in the property tax delinquency rate.

“Around the United States, more people are late with their property tax payments,” Reschovsky says. “In Wisconsin, the delinquency rate was 2 percent in 2005. In 2007 it was 2.5 percent, and by 2009 it had risen to 3 percent.”

Of Wisconsin’s 1,850 municipalities, about 60 allow more than two installments for real estate taxes, Reschovsky says. These municipalities are generally larger: of Wisconsin’s 38 municipalities with populations over 20,000, with 22 allowing multiple installments.

In addition, collection methods for delinquent payments vary across and within Wisconsin counties, Reschovsky adds. Some municipalities collect their own delinquent taxes, while many others give the county this responsibility.

On average, in fiscal year 2009 local governments in Wisconsin relied on the property tax for 65.2 percent of their own-raised revenues. In only six states did local governments raise a higher share own revenues from the property tax.

Reschovsky and Waldhart’s study is available online as La Follette School Working Paper No. 2012-013. The project started after City of Madison Treasurer Dave Gawenda noticed an increase in property tax delinquency and wondered whether increasing the number of payment installments would bring it down. Now an analyst with the Wisconsin Legislative Audit Bureau, Waldhart was a student in Reschovsky’s spring 2011 tax policy seminar and expressed interest in the project. The Lincoln Institute of Land Policy, where Reschovsky is a visiting fellow, supported the research. The paper is also posted at the Lincoln Institute website.

A version of this article appears in the fall 2012 La Follette Notes newsletter for alumni and friends.

— posted June 6, 2012; updated October 12, 2012