Superior Days delegates get update on reciprocity stalemate

Without Legislative action in the state of Minnesota, residents living in Wisconsin and working in Minnesota, and those living in Minnesota but working in Wisconsin could likely have to file two state tax forms into the future, Wisconsin Revenue Secretary Richard Chandler told Superior Days delegates Tuesday morning.

The sticking point — one that has stalled negotiations for about a year — is the revenue Minnesota would lose from taxpayers who live in Minnesota and work in Wisconsin.

Minnesota doesn’t provide a full credit for taxes paid to other states, Chandler told the delegates. And Wisconsin taxpayers shouldn’t make up the difference, he said.

While solutions have been found to the two primary issues that prompted former Minnesota Gov. Tim Pawlenty to end the 40-year tax reciprocity agreement between Wisconsin and Minnesota, Chandler said the estimated $6 million to $8 million more Minnesota collects from taxpayers who work in Wisconsin is likely to remain a sticking point without legislative action that centers the argument on the taxpayer rather than the treasury.

“Some Minnesota taxpayers pay more taxes than they otherwise would have,” Chandler said.

Wisconsin provides a full credit for income taxes paid to other states.

“They’re taking a treasury-centric approach,” Chandler said. “We think they should take a taxpayer-centric approach.”

However, if that problem can be resolved, Chandler said solutions have been found for the lengthy delays Minnesota received in getting paid the difference in what was paid in Wisconsin and what they would have received in Minnesota without reciprocity. The secretary said Wisconsin would remit estimated payments on a periodic basis and submit at reconciliation payment for the balance.

Also, a study conducted in 1995 to determine what Wisconsin owed Minnesota — because more Wisconsinites work in Minnesota — hadn’t been updated when the agreement ended in 2009.

That study is underway and is expected to be available in March, Chandler said.

However, Superior City Councilor Dan Olson, a business manager for Local 1091, which covers four counties in northern Minnesota and three counties in Northern Wisconsin, said Minnesota taxpayers aren’t the only ones paying a penalty since the reciprocity agreement ended.

As a Superior resident working in Minnesota, he said Wisconsin taxpayers don’t have an option to pay Wisconsin taxes on a quarterly basis, resulting in penalties when Minnesota collections provide an insufficient credit to cover what would be owed to Wisconsin.

Olson said while he appreciates the efforts made so far; however “I would like to see you sit back down at the table, and try and get that focus.”

Chandler said a new study is in process and is expected to be available in March.

“I know what you’re saying,” Chandler told Olson. “You’re saying there needs to be some compromise. We agreed to their position on every issue, except, I think it’s almost impossible to agree” Wisconsin taxpayers should pay to lower taxes for Minnesota.

“I think they’ve got to come to see it that way,” Chandler said.

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