Superior Days delegation gets hopeful news on taxes
MADISON — 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.
Restoring tax reciprocity between Wisconsin and Minnesota would solve that problem, but it hasn't happened in the decade since former Minnesota Gov. Tim Pawlenty ended the 40-year income tax agreement between the two states.
"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 to restore revenue lost in Minnesota for Wisconsinites that crossed the border for work.
But the Superior Days delegation hasn't given up on the issue that affects so many who cross the border for work in the Northland.
And Tuesday, Feb. 12, members of the delegation learned state officials haven't given up either.
"It's one of my highest priorities," Wisconsin Revenue Secretary Peter Barca said during a meeting with Superior Days delegates Tuesday. "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 under the previous agreement.
"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. "Even though I came from more the Illinois border down in the Racine area, I get enough anxiety filling out one tax form. I can't imagine having to fill out two."
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.
However, he said the Wisconsin Department of Revenue has addressed prior concerns brought up by the Minnesota Department of Revenue, such as the loss of resulting from more Wisconsinites working in Minnesota.
"We're going to give Minnesota a few weeks here to study the proposal," Barca said, adding the state of 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 the delegation that it 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.
Paine said with changes in the federal tax code, he appreciates the Department of Revenue's urgency in addressing the issue.
"Thank you for your efforts," Allen said. "It means a lot to me."