Reinert Disappointed by Income Tax Reciprocity Impasse
DULUTH, Minn. — Earlier today, talks broke down between the Departments of Revenue from Minnesota and Wisconsin to reinstate income tax reciprocity for tax year 2013. Both states had targeted October 1, 2012 to come to a new reciprocity agreement after then Governor Tim Pawlenty ended the original agreement in 2009.
“This is disappointing news,” said State Senator Roger Reinert (DFL-Duluth). “We have worked extremely hard to get income tax reciprocity back for tax year 2013, and we thought this was a done deal. Obviously, it was not.”
An income tax reciprocity agreement between Minnesota and Wisconsin would allow tax payers who work in one state but live in the other the simplicity of filing in one state only. Negotiations have centered on the formula for payment calculation, as both states want to guard against an unfair loss of revenue to due to differences in Minnesota and Wisconsin tax structure.
The Minnesota Department of Revenue released the income tax reciprocity proposal on July 27; however, Wisconsin’s Department of Revenue has been unwilling to sign it.
“From Minnesota’s standpoint, the document was done and ready to sign,” said Senator Reinert. “We needed Wisconsin to come to terms on a couple final issues. At this point that looks extremely unlikely before the Monday deadline.”
One indication that channels of communication are still open for a future agreement is the two state’s cooperation on an updated benchmarking study that will look at Minnesota and Wisconsin’s income tax revenue. The last study was conducted in 1995, but with major shifts in demographics along the Minnesota-Wisconsin border, the study is no longer accurate. The new analysis, authored by Senator Reinert and to be complete by March 2013, will give a clearer picture of each state’s potential net revenue gains and losses under a reciprocity agreement.
“We did make progress this year,” added Reinert. “My bill creating a new benchmarking study will give us critical data for our efforts to reach a reciprocity agreement. This remains a priority for our regional economy, and I’m ready to go at a moment’s notice to continue negotiations.”