If you witness abuse or acts of cruelty, phone 911 or your local police department immediately!
Steps You Can Take
Talk to the owner. Carefully try to determine whether the owner neglects their dog unknowingly, or accidentally. Often a person can find themself unable to properly care for an animal, or was unprepared for the amount of dedication a dog needs.
Offer to take the dog off their hands. Offer a sum of money if need be. Once they have relinquished the dog (it is strongly recommended that you obtain a proof of purchase, or receipt), you can then turn the dog over to a rescue, or keep the dog yourself.
Call your local humane society, SPCA branch, or animal control department. Describe what you have seen in regards to your neighbor's neglect or mistreatment of his dog. They will either take action, or advise you further.