States exploring tax reciprocity plan
MADISON, Wis. — Keith Allen of Superior, a member of the Douglas County Board, doesn't wait until April 15 to file his state tax returns. In fact, as a Wisconsinite working in Minnesota, he files his Minnesota tax return first so he can use his refund to pay income taxes owed in Wisconsin.
"It makes it more complicated," Allen said of working in one state and living in the other.
Restoring tax reciprocity between Wisconsin and Minnesota would solve that problem, but reciprocity hasn't existed in the decade since former Minnesota Gov. Tim Pawlenty ended the 40-year agreement.
"It comes with a real cost for people," Superior Mayor Jim Paine said. "For most taxpayers with low to moderate income, they have to pay for tax preparation ... it's not just an annoyance. It comes with a real cost."
Pawlenty ended the agreement because Wisconsin was slow to pay what it owed Minnesota. Wisconsin Revenue Secretary Peter Barca hasn't given up on the issue that affects so many.
"It's one of my highest priorities," Barca said. "We started on it already. In fact, our crew over at the Department of Revenue has been working on it for some time, for the last four, five, six months, and put together a proposal that is sort of a win-win proposal."
He said the new proposal is revenue neutral for Minnesota and would ensure Minnesota is paid quarterly, rather than annually.
"The benefit for us is Minnesota Gov. Tim Walz represented a border community so I think he will be even more acutely aware of how frustrating it is to have to fill out two sets of taxes," Barca said in reference to Walz representing Minnesota's 1st Congressional District until becoming government in January.
Having worked in the Chicago area early in his career, Barca said he knows how vital tax reciprocity agreements can be.
"Our goal is to have something for the 2020 tax year," Barca said. "So early fall, we'll try to get it done ... we're going to give Minnesota a few weeks to study the latest proposal."
Barca said he and Minnesota Revenue Commissioner Cynthia Bauerly are planning to meet to discuss the proposal and work out any remaining glitches.
"We're going to give Minnesota a few weeks here to study the proposal," Barca said, adding the Wisconsin would owe Minnesota a difference of about $106 million annually — about $26.5 million quarterly — for taxes collected from Wisconsin residents working in Minnesota. He said that is equal to Wisconsin's gain for income taxes collected from Wisconsin residents working in Minnesota.
"We feel we've met everything they put forward," Barca said. "Now that we've met all the standards, now that we have a new governor in Minnesota that comes from a border area, I'm optimistic."
However, he cautioned that any deal would still have to go through legislative processes and be signed into law by governors of both states to finalize a new reciprocity agreement.
"It would be nice to have it done by April 15 so we can let people know they never have to fill out two tax forms again," Barca said.