Gov. Scott Walker took a step in reinstating the popular, but recently terminated Minnesota-Wisconsin tax reciprocity program by paying back the roughly $60 million in overdue bills that was owed to Minnesota earlier this month.
Former Minnesota Gov. Tim Pawlenty canceled the program in 2009 because Wisconsin skirted its duty to pay Minnesota back in a timely fashion each year, though the state still paid the debt with interest.
With the payment made July 13, the states are now looking forward to restarting the program.
“Minnesota told Wisconsin before tax reciprocity could be enacted, we needed to pay our past due bills, which Governor Walker did yesterday,” Walker spokesperson Cullen Werwie said in an email to The Badger Herald. “We have been working with Governor Dayton’s office since January to find a solution to restarting tax reciprocity.”
The program allows residents who live in one state but work in the other to forego the hassle of filing two income returns and instead file one return with their state of residence. Because there are an estimated 35,000 more border crossers who live in Wisconsin, Minnesota receives a yearly check to make up for the loss in revenue.
Rep. Nick Milroy, D-South Range, whose district lies just west of three bridges that cross the Mississippi to Minnesota in northern Wisconsin, said in a statement he believed Walker hinted that the reciprocity debt would have been paid in the budget repair bill passed earlier this year and was upset when the bill did not include the payment.
Democrats upset with the budget repair bill suggested alternative legislation, which included paying the overdue bill, but it never progressed. Milroy, like the governor, is interested in seeing the agreement between the two states start again.
“Wisconsin citizens that work in Minnesota should not be burdened with additional tax filing requirements that ultimately cost them time and money,” he said.
Had former Gov. Jim Doyle paid the amount Minnesota required on the Dec. 1, 2010, due date, it would have cost Wisconsin $58.7 million. The debt grew interest at a rate of about $4,600 per day until Walker paid it off this week at $59.7 million.
The payment will fall far short of helping Minnesota out of its budget crisis, said University of Wisconsin economics professor Andrew Reschovsky.
“You and I would love $60 million, and having it sooner rather than later is good for the state, but it’s not going to solve their situation,” Reschovksy said. “Minnesota is talking about a $5 billion hole, so $60 million is small change.”
He added deterring the payment even longer and using the $60 million to reduce cuts to public services made in the 2011-2013 Wisconsin budget would not have been effective either. The amount of money paid to Minnesota would not have made much difference in the face of more than $800 million in state aid reductions to education, Reschovsky said.