Sponsored By
An organization or individual has paid for the creation of this work but did not approve or review it.

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

Minnesotans who work in Wisconsin to get tax break

ST. PAUL — Minnesota residents who work in Wisconsin will get a tax break next year, but they’ll still have to file tax returns in both states.

273eec2526ba2f2b17877b7eff0e4f2f.jpg
Gene Pelowski Jr.

ST. PAUL — Minnesota residents who work in Wisconsin will get a tax break next year, but they'll still have to file tax returns in both states.

Minnesota is abandoning efforts this year to reach a tax reciprocity agreement with Wisconsin. Instead, the state will give Minnesota residents who cross the border a tax credit to make up for the higher Wisconsin taxes. That tax credit will be in effect for 2017 and cost the state an estimated $8.5 million.

Minnesota lawmakers passed legislation this year allowing the tax credits to kick in if a tax reciprocity agreement couldn't be reached. House Taxes Committee Chairman Greg Davids, R-Preston, authored the bill.

"This is a great day for Minnesotans that work in Wisconsin. They just got a pay raise, and that's a good thing," Davids said.

Minnesota had a tax reciprocity agreement with Wisconsin for more than 40 years. That ended in 2009 when then-Gov. Tim Pawlenty scrapped the deal in the midst of a state budget shortfall. He cited Wisconsin's repeated failure to pay money it owed Minnesota on time. At one point, Wisconsin was sending its payments for $100 million to the state 15 months late. Since 2009, efforts by Minnesota and Wisconsin revenue officials to reach a deal have failed.

ADVERTISEMENT

An estimated 24,000 Minnesotans work in Wisconsin and many of them have had to pay hundreds of dollars more in income taxes each year than they did when reciprocity was in place. The hardest-hit county in the state is Houston County, which has the most Minnesota residents working in Wisconsin. A 2013 study estimated 3,638 Houston County residents work in the Badger State.

Minnesota Department of Revenue Commissioner Cynthia Bauerly sent a letter to Wisconsin Department of Revenue Secretary Richard Chandler this week announcing the decision to cease tax reciprocity negotiations for 2017. In a statement, Bauerly said she concluded reinstating tax reciprocity would not be in Minnesota's best interest at this time.

"Given the new refundable credit, Minnesotans will not pay more in taxes without an agreement," Bauerly said. "And because an agreement would cause additional financial exposure for Minnesota's budget, an income tax reciprocity agreement with Wisconsin is not in Minnesota's best interest."

The Wisconsin Department of Revenue did not respond to a request for comment on Minnesota's decision.

La Crescent Mayor Mike Poellinger said tax reciprocity is a big issue in his community, where upwards of 80 percent of residents work in Wisconsin. He welcomed news about the tax credit.

"It's great that it's happening, and I applaud Minnesota for recognizing the situation and trying to remedy it," Poellinger said.

However, he said he does have concerns about how complicated it will be for people to take advantage of the tax credit.

"If it's not simple to apply, it may be something where (taxpayers) have to seek professional help to take advantage of it. Hopefully, that won't be the case," he said.

ADVERTISEMENT

He added he still would like to see tax reciprocity between the two states restored because it makes filing taxes much easier for border-crossers.

Rep. Gene Pelowski, DFL-Winona, supported the tax credit legislation. He said he supports Minnesota officials' decisions to give up on the reciprocity talks this year and move ahead with the tax credit.

"I just don't see us working with Wisconsin in particular on this issue," he said. "It's not a big enough issue for them. They obviously aren't getting the same number of complaints we are, or if they are, they are going unheeded."

ADVERTISEMENT

What To Read Next
Get Local

ADVERTISEMENT