Wisconsin tax reciprocity up for debate

Minnesota legislators are considering reinstating a deal with Wisconsin so people who live in one state and work in the other do not need to file two income tax returns.

A bill studying the situation is set to be included in an overall tax bill later this legislative session and Rep. Greg Davids, R-Preston, said he plans a bill to reinstate the tax reciprocity arrangement. Then-Gov. Tim Pawlenty killed the reciprocity arrangement after Wisconsin fell 17 months behind paying what it owes Minnesota.

New Wisconsin Gov. Scott Walker told his state’s legislators this week that the state owes Minnesota $60 million and his administration has said it is interested in bringing back reciprocity.

The reciprocity deal dates back to the 1970s, when state leaders decided to make it easy on thousands of people who crossed the border to work. Since more Wisconsinites work in Minnesota than the other way around, Wisconsin annually collected more money and owes the difference to Minnesota.

“The reason for reciprocity, of course, is to simplify tax filing,” said Paul Wilson of the Minnesota Revenue Department.

Without reciprocity, thousands of people in both states this spring are filing tax returns to both Wisconsin and Minnesota, with some paying more because of the new arrangement.

Minnesota also has reciprocity deals with North Dakota and Michigan, but about an equal number of taxpayers cross those borders to work and no money changes hands.

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