The short-term repercussions of a Minnesota-Wisconsin tax reciprocity agreement terminated by Minnesota Gov. Tim Pawlenty last September was a benefit to state coffers, but there is enough of a groundswell to re-start negotiations that serious discussions are about to resume.
A new agreement would benefit many Minnesota taxpayers — saving them some money and eliminating the headaches associated with filing two state income tax returns.
Here’s an idea that, if all goes well, will strike a blow for individual taxpayers. It’s also an example of legislators in both states putting their constituents first.
The tax reciprocity agreement had been in place for 40 years, and it operated under the simple premise that residents who live in one state and work in another deserve relief from having to file returns in both states. So lawmakers from both states collaborated on a plan that let their residents file single returns, with Wisconsin (because more than twice as many Wisconsin workers crossed the border for work) reimbursing Minnesota for the tax money it collected from Minnesota workers.
This year, there was a problem. Minnesota officials believed Wisconsin was too slow to make the payments. Pawlenty, needing all the cash he could get to help balance the state’s books, asked Wisconsin to speed up delivery. But negotiations broke down, and the agreement was scrapped.
Fortunately, there are enough people in both states who believe a new reciprocity agreement can be hammered out. A new deal will certainly benefit a good many taxpayers. An estimated 33,500 Wisconsin workers and 13,000 from Minnesota are affected, and at least 8,000 Minnesotans would have to pay an average of $300 in additional taxes to Wisconsin (Wisconsin has a higher individual tax burden than Minnesota) with no agreement in place.
Minnesota’s new revenue forecast was rolled out on Wednesday, and the adjusted numbers will aid both states in reciprocity negotiations. For the moment, it’s encouraging that leaders on both sides are seeking closure on this issue in a spirit of good will. The two states still don’t agree on the comparable merits of the Packers and the Vikings, of course, but taxpayers will accept cooperation wherever they can get it.
