Income tax reciprocity between Minnesota and Wisconsin won’t end, despite Minnesota Gov. Jesse Ventura’s plan to eliminate the program as part of the state’s budget deficit.
Gov. Scott McCallum announced Friday the Minnesota Legislature had made amendments to Gov. Ventura’s budget deficit plan that would preserve the state’s income tax reciprocity between Minnesota and Wisconsin.
“Minnesota legislators made the right choice in maintaining reciprocity,”
McCallum said in a statement. “They undoubtedly recognized that this long-standing cooperative agreement has served the citizens of both states very well. We must solve our respective budget deficits without sacrificing programs that clearly benefit Minnesota and Wisconsin workers.”
Reciprocity is a way of simplifying the tax filing requirements for many of the 50,000 Wisconsin residents who work in Minnesota and the 25,000 Minnesota residents who work in Wisconsin. Under current law, residents only have to file and pay taxes in their home state.
If reciprocity ended, Wisconsin residents who work in Minnesota would have to file taxes in Minnesota and pay taxes directly to Minnesota on the wages they earn there.
But they would not be forced to pay additional taxes because Wisconsin gives workers a dollar-for-dollar credit for taxes paid to other states.
However, Minnesota residents who work in Wisconsin would have both an additional return to file and additional Minnesota taxes to pay. This would mean Minnesota residents would have to pay an additional $8 million a year.
“The bottom line is that workers from both states should not see any added inconvenience or extra taxes because they happened to find jobs on the other side of the border,” McCallum said. “I’m pleased Minnesota lawmakers opted to put the interest of taxpayers first, which is exactly what I am doing here in Wisconsin.”
Earlier this month, Rep. Kitty Rhoades, R-Hudson, called for a meeting with Gov. Ventura to discuss the future of tax reciprocity between the two states and said a significant number of people would be affected if reciprocity were eliminated.
“Governor Ventura’s proposal to eliminate reciprocity between our states impacts over 75,000 residents who live on one side of the river and work in the other,” Rhoades said.
Rhoades said in a letter to Gov. Ventura that there was a way to retain the popular provision and make government easier for families. She also said ending reciprocity could hurt bordering towns and not stimulate economic growth.
“We need to continue to foster economic agreements between our states, not push each other farther away,” Rhoades said. “Reciprocity makes government easier for these families in that they only need to file one tax return. I cannot fathom why we would want to change our ways to make life more difficult for these families while increasing taxes on Minnesota residents.”
