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Wisconsin Gov. Scott Walker announces on Wednesday that his state has paid $60 million it owed Minnesota over a tax agreement. Political leaders in both states say they would like to restore the agreement that allowed people living in one state but working in the other to pay income taxes in just one state. Photo by Steve Dzubay/RiverTown Newspaper Group

Wisconsin pays up: Minnesota gets overdue $60M payment

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Wisconsin pays up: Minnesota gets overdue $60M payment
Cottage Grove Minnesota 7584 80th Street South 55016

HUDSON, Wis. -- Wisconsin has paid off a nearly $60 million debt to Minnesota, opening the door for a new agreement allowing residents of one state who work in the other to just file one state income tax form.

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Wisconsin Gov. Scott Walker announced in Hudson on Wednesday that his administration sent $59.7 million to its western neighbor late Tuesday.

With this debt paid, the two states can move ahead with a new reciprocity agreement to benefit both taxpayers and their employers, Walker said. He predicted the new agreement would be finalized within two months.

Minnesota Gov. Mark Dayton was on the road in southern Minnesota pitching his budget proposal and could not be reached for comment. But in a statement his Revenue Department released, he said he has asked Minnesota Revenue Commissioner Myron Frans to explore a new agreement with Wisconsin Revenue Secretary Richard Chandler.

Chandler joined Walker at Airworthy Aerospace, a Hudson company with 50 workers, about 40 percent of whom live in Minnesota.

Renewing tax reciprocity would ease tax filing for more than 55,000 Wisconsinites and 20,000 Minnesotans.

Wisconsin fell 17 months behind in its tax reciprocity payments to Minnesota, so then-Gov. Tim Pawlenty canceled the program at the end of 2009 and demanded that Wisconsin pay up.

Until it was cancelled, the two states had an agreement that allowed people who live in one state and work in the other to pay income taxes and file tax returns only in their home state. Each state collected taxes from its residents and settled up with the other state. Wisconsin typically ended up owing Minnesota.

Reinstating the reciprocity agreement is part of his attempt to make it easier to do business in Wisconsin, Walker said. He said it simplifies things for taxpayers but also helps businesses that employ people on either side of the border.

This represents "a significant step forward toward getting a new reciprocity agreement in place," Chandler added. He said reinstatement talks with Minnesota officials have been "very cordial and very productive."

Legislators from both states have pushed to reinstate reciprocity. Minnesota Sen. Ted Lillie, R-Lake Elmo, attended the Hudson announcement, as did Wisconsin Sen. Sheila Harsdorf, R-River Falls, who faces an August recall election against a Democratic challenger.

"There's a border, but you know, the border's on paper," Harsdorf said.

The reciprocity standoff made things difficult for people who live in one state and work in the other, agreed Todd Harmon, who lives in Cottage Grove, Minn., and works for Excel Energy in Hudson, and Steve Thein, who lives in Houlton and works for Ecolab in St. Paul.

With higher Wisconsin fuel costs and a dispute over building a new Stillwater bridge, it is tempting to move back to Minnesota, Thein said.

The reciprocity breakdown has taken its toll on employers, too, said Kevin and Andy Lindus, owners of Baldwin-based Lindus Construction, which has customers in Minnesota and western Wisconsin.

Often, said Kevin Lindus, workers will spend half a day on a Minnesota project and half on a Wisconsin project.

"We have to separate that," Lindus said. "That becomes a burden to our office staff."

He said it cost his company $20,000 to update computer software to handle the taxation changes.

The loss of reciprocity also costs workers who have had to pay about $100 more to have their tax forms prepared, Andy Lindus said.

Don Davis of the Forum Communications Co. Minnesota Capitol Bureau contributed to this story.

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