Lawmakers met and drafted letters to Minnesota Gov. Tim Pawlenty and Wisconsin Gov. Jim Doyle this week, urging them to continue tax reciprocity negotiations between the two states.
The group was composed of bipartisan legislators from Minnesota and Wisconsin. Sen. Sheila Harsdorf, R-River Falls, Sen. Dan Kapanke, R-La Crosse, Rep. Kitty Rhoades, R-Hudson, Rep. John Murtha, R-Baldwin, and Rep. Ann Hraychuck, D-Balsam Lake, represented the Wisconsin Legislature.
“They wanted to send a clear message to the governors this is something that is important to both them and their constituents. It’s an issue that definitely deserves the governors getting back to the negotiation table,” said Jack Jablonski, spokesperson for Harsdorf.
In the past, the tax reciprocity between the two states allowed individuals who worked in one state and lived in the other to only file one income tax return in the state in which they were residents, according to Jessica Iverson, spokesperson for the Wisconsin Department of Revenues.
She said currently, about 57,000 Wisconsin residents work in Minnesota and about 23,000 Minnesota residents work in Wisconsin. Due to the disparity, Wisconsin must reimburse Minnesota for the remainder of the income tax revenues.
Dale Knapp, research director for the Wisconsin Taxpayers Association, said the disagreement between the two states stems from a failure to establish a payment timetable from Wisconsin to Minnesota and current economic woes facing both states. He added Minnesota ultimately decided not to wait for Wisconsin to come up with the money.
Iverson said though the change may inconvenience some, it will change individual’s tax liability very little, if at all.
“Wisconsin residents working in Minnesota will not pay more, but some Minnesota residents working in Wisconsin may pay slightly more. I don’t think it will end up being a major concern,” Iverson said.
Others think a failure to negotiate could translate to other reciprocity issues. While tax reciprocity between the two states does not change reciprocity regarding university tuition, Rhoades said she hopes the failure is not the symptom of a larger problem.
“Sometimes when one agreement fails, it can be a slippery slope,” Rhoades said.
Many, however, remain optimistic the states will ultimately be able to reach a compromise.
“We’re really hopeful that the governors will be willing to reconsider and renegotiate, so that the citizens of both states can benefit from a lasting compromise,” Jablonski said.
However, Iverson said the tax reciprocity, which has been in effect for 41 years, will end Jan. 1, 2010.
“Over the past couple of decades, all the other governors have been able to put aside their differences and agree to reciprocity, so I hope that these two governors can, too,” Rhoades said.
