Local lawmakers want to reverse a decision forcing interstate commuters in Minnesota and Wisconsin to pay income taxes to both states - costing many Minnesotans who work in Wisconsin an average of $300 more per year.

Minnesota and Wisconsin have had a reciprocity agreement since 1968 that allows interstate commuters who live in one state and work in the other to file tax returns only in the state where they live.

But the Minnesota Department of Revenue scrapped that agreement last week after it couldn't agree with Wisconsin officials on how much money should change hands and when the payments should be due. Gov. Tim Pawlenty's administration says the move will shrink Minnesota's multibillion-dollar budget deficit, netting the state $131 million in the next two years.

But Winona-area lawmakers note more than half the Minnesota residents who use the reciprocity program - about 8,000 residents - now will pay an average of $300 more in income taxes per year to Wisconsin. Rep. Greg Davids, R-Preston, and Sen. Sharon Erickson Ropes, DFL-Winona, released a proposal Thursday that would reinstate the reciprocity agreement and give the Legislature authority over the program instead of the Minnesota Department of Revenue.

Davids disputed a Department of Revenue statement that Minnesota residents won't pay more taxes to their own state. That's "splitting hairs," Davids said, because differences between Wisconsin and Minnesota tax codes will force many Houston County residents who commute to La Crosse to pay more taxes to Wisconsin in 2010.

"For somebody that lives in La Crescent or Hokah, their taxes just went up because of a decision the governor made," Davids said.

Since more Wisconsin residents commute to Minnesota than vice versa, Wisconsin made yearly reciprocity payments to Minnesota to account for the difference - but usually not until more than a year later. A Pawlenty spokesman said Minnesota taxpayers can't afford that delay, and that residents who will pay more taxes because of the decision shouldn't blame the governor.

"They should take that up with the state of Wisconsin," spokesman Alex Carey said.

The de facto tax increase apparently works only one way: Virtually all Wisconsin residents who work in Minnesota shouldn't have to pay more because of the decision, a spokeswoman for the Wisconsin Department of Revenue said.

Ropes said the reciprocity decision underscores Pawlenty's pattern of eschewing negotiations and acting unilaterally, as he did earlier this year by unallotting $2.7 billion from the state budget.

"When it comes to the final, tough discussions, this governor is establishing a pattern of just opting out," Ropes said.

Ropes and Davids plan to introduce the measure reversing the reciprocity decision when the 2010 legislative session begins in February.

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