Wisconsin makes good on Minnesota tax debt

Wisconsin paid off its $60 million debt owed to Minnesota under the former tax reciprocity agreement between the states, Gov. Scott Walker announced today.

The debt was left unpaid by the previous Wisconsin administration after former Minnesota Gov. Tim Pawlenty ended the agreement in 2009.

The agreement had allowed workers living in one state and working in the other to pay income taxes to their home state, saving taxpayers the burden of filing two tax state returns.

“It was a huge disappointment for both Minnesota and Wisconsin taxpayers when former Minnesota Gov. Pawlenty ended reciprocity last year,” said Sen. Bob Jauch, D-Poplar, a longtime advocate for maintaining the agreement. “I’m delighted that Gov. (Mark) Dayton is reaching out to Gov. Walker to re-establish tax reciprocity between the two states, something that has served both states well through the years.”

The money, which was due Dec. 1, is the final payment owed through the former income tax reciprocity agreement.

Jauch said he appreciated Dayton’s understanding of the important of the agreement for taxpayers in both states.

Since January 2010, when the 32-year agreement officially ended, workers living in one state and working in the other have been required to pay taxes to the state where they work. That means filing tax returns in two states instead of one.

If a new agreement is in place individuals will not have to file tax returns in two states, the governor said in a prepared statement.

“Three weeks ago I spoke directly with him and he is sincerely enthusiastic about having a new agreement in place once Wisconsin has paid Minnesota the money due them since January,” Jauch said.

“We want to make life easier for taxpayers and pay our bills,” Walker said. “With this payment we can continue talking with our Minnesota neighbors about restoring our reciprocity agreement. Renewing a reciprocity agreement will ease tax-filing for over 55,000 Wisconsinites and 20,000 Minnesotans.”

It’s an effort that has garnered strong support from senators representing residents on Wisconsin’s western border including Jauch, Sheila Harsdorf, R-River Falls, and Dan Kapanke, R-La Crosse as well as Assembly representatives in the region.

“In my very first conversation with Gov. Walker following his inauguration, I expressed concern about the lack of payment to Minnesota,” said Rep. Nick Milroy, D-South. Range. “In January of this year, I wrote the governor asking that he work with the state of Minnesota to reinstate the reciprocity agreement. I also met with legislative members on both sides of the aisle to encourage them to make it a budget priority to pay the debt owed so we could move forward with reciprocity negotiations.”

Wisconsin owed Minnesota $58.7 million, accruing interest of more than $4,000 daily after the due date; it should have been paid long ago, Milroy said.

“Now it’s time to move forward to reinstate the income tax reciprocity agreement,” Milroy said. “Wisconsin citizens that work in Minnesota should not be burdened with additional tax filing requirements that ultimately cost them time and money.”

In March, State Rep. Greg Davids, R-Preston, of southeast Minnesota and chairman of the Minnesota taxes committee, introduced a bill to restore the tax reciprocity agreement. The bill, which would require the Minnesota governor to get legislative approval before ending any future tax reciprocity agreements with Wisconsin, passed at the committee level with an amendment for a benchmark study of tax reciprocity. The study would look at the number of residents of each state with earnings in the other; income earned by residents; and the amount of money lost or gained if the agreement is reinstated. Study results are due to the Minnesota Legislature by March 1, 2013.

The study was included in the Minnesota Omnibus Bill.

Today’s payment paves the way for further talks over a new agreement, Walker said.

With the outstanding bill paid, the two states are now able to work on a new agreement that will benefit individual taxpayers and small businesses, Walker said. If a new agreement is in place individuals will not have to file tax returns in two states, the governor said.

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