Clock running out on fixing tax reciprocity agreement

A bipartisan group of 21 lawmakers has sent a letter to Wisconsin Gov. Jim Doyle and Minnesota Gov. Tim Pawlenty asking them to restore the tax reciprocity agreement between the two states.

The lawmakers are asking officials to start negotiating both a short-term and long-term fix to the reciprocity dispute. And the clock is ticking. The Minnesota Department of Revenue said a solution has to be in place by early November in order to alert affected taxpayers and employers. Otherwise, the reciprocity agreement will end as of Jan. 1, 2010.

Lawmakers signing the letter include DFL-Winona, Rep. Greg Davids, R-Preston and Rep. Steve Drazkowski, R-Mazeppa, Sen. Sharon Erickson Ropes, DFL-Winona and Sen. Steve Murphy, DFL-Red Wing.

The letter goes on to ask the two states to also look at a long-term fix to the problem. That could include updating a study that calculates reimbursements and potentially revising the interest rate applied to Wisconsin's payments.

The letter states, "We are keenly aware of the difficult budget circumstances facing both states. We believe, however, that this fact makes it even more important to strive for a long-term agreement that will support the working relationship and regional economy  of which we have been so reliant and have benefited from in the past."

Last month, the Minnesota Department of Revenue announced it was scrapping the 41-year-old agreement as of Jan. 1, 2010. At that point, Minnesotans who work in Wisconsin must file and income tax return in both states. That means higher taxes for Minnesota workers. The department estimates that 8,000 Minnesota residents will see a tax increase of $300 year.

Click here to Download Reciprocity Restoration Letter