Two bills by local state lawmakers would require a study to look at the effects of restoring the nixed tax reciprocity agreement between Minnesota and Wisconsin. One version of the bill went before the Minnesota House Tax Committee on Wednesday and was laid over for possible inclusion in the omnibus tax bill by committee chair, Rep. Greg Davids, R-Preston, who is also the bill's chief author. Sen. Jeremy Miller, R-Winona, is a co-sponsor of a companion bill in the Senate.
The proposal comes hand in hand with Davids' efforts to restart the decades-old agreement between the two states, he said.
Reciprocity would allow people who commute between states to file a single tax return where they live, instead of filing a return for each state. It would also lower taxes for some Minnesota citizens.
"They have to file two tax returns," he said. "Then they have to pay the higher of either tax."
The proposed "benchmark study" would correct some of the old law's problems by bringing any new deal between the two states up to speed, Davids said. Similar studies occurred only three times over a 37-year period before Minnesota officials abandoned the arrangement last year, according to the Department of Revenue. If the bill passed, the department would tally the number of people who cross the border for work, their combined income, and any lost tax dollars if reciprocity was restored.
Davids represents most of Houston County, where nearly 3,000 people cross the Mississippi River for work. Statewide, most cross the other direction. About 57,000 Wisconsin residents work in Minnesota, while only about 22,000 Minnesota residents work in Wisconsin, according to the Wisconsin Department of Revenue.
Former Gov. Tim Pawlenty ended the agreement in 2010 because estimates showed Minnesota could bring in an extra $41 million - $131 million total - by taxing Wisconsin residents directly.
Wisconsin still owes Minnesota $58 million from the old agreement. Plans to repay the money are attached to Gov. Scott Walker's budget repair bill - stalled because of 14 state senators who recently fled Wisconsin to avoid voting on proposed cuts.