ST. PAUL -- A group of Wisconsin legislators sent a letter to Minnesota Gov. Mark Dayton on Thursday expressing "deep concern" about a final tax reciprocity deal between the two states.
In February, Wisconsin and Minnesota reached an agreement in principle that would once again allow residents who live in one state and work in the other to file only one state income tax return. But before the deal can be finalized, the states must agree on how much money Wisconsin will owe Minnesota the first year the policy is restored.
Minnesota is estimating that figure at $96 million, but Wisconsin's estimate is $55.6 million. If reciprocity is to be restored by Jan. 1, the two states must agree on a figure by Oct. 1.
The 16 Wisconsin legislators said in their letter to Dayton that it is their understanding Minnesota is "insisting" Wisconsin pay the $96 million amount -- something Minnesota's Deputy Revenue Commissioner Matt Massman denied Thursday.
"We have not insisted on any number in particular," Massman said. "We have shared the $96 million number with them, and that's our estimate where we think the net revenue loss would be at this point."
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"We share the sentiment and sense of urgency that this is an important tax-simplification step for taxpayers," he said, adding that Minnesota also wants to make sure it is appropriately compensated.
Both Massman and John Koskinen, chief economist for the Wisconsin Department of Revenue, said the two agencies are working together to meet the Oct. 1 deadline.
"We still want an agreement in place by that time," Koskinen said. "Whether or not it happens, time will tell."
About 60,000 Wisconsin residents who work in Minnesota and 20,000 Minnesota residents who work in Wisconsin currently must file state income tax returns to both states.
Because more of its residents work across the border, Wisconsin made annual payments to Minnesota under a 41-year-old tax reciprocity agreement that ended in 2009 because the two states could not agree on the timing of the payments.
If the states finalize an agreement by Oct. 1, it could be adjusted next year. Both states are working on a benchmark study on annual reciprocity payments that is expected to be completed in March.
If the states cannot reach an agreement by the October deadline, the earliest reciprocity could be restored is January 2014.
"There are only a few weeks left to put this agreement into place for 2013," says the letter sent to Dayton. "Failure to do so will hurt thousands of taxpayers on both sides of the border."
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Wisconsin state Sen. Sheila Harsdorf of River Falls, whose district runs along the St. Croix River, was one of the lawmakers who signed the letter.
"This is a huge issue in my district, because of the number of people who live in Wisconsin and work in Minnesota," she said Thursday. "There is a border there, but there is so much interstate commerce that we feel we really operate as a region."
Minnesota state Sen. Jeremy Miller, R-Winona, said Houston County in his district is one of the Minnesota counties most affected by the tax reciprocity issue.
"As far as I know, we all have a common goal to have a new agreement in place for January 1, 2013," he added. "I think we're moving toward that goal."
