Revenue head holds out little hope for quick return of tax reciprocity
Wisconsin residents who work in Minnesota and are hoping for a break from the expense and inconvenience of filing income tax returns in both states are out of luck unless Gopher State officials change their stance.
Because the states must give employers notice of withholding well ahead of the start of a tax year, reciprocity won’t be in effect for taxes withheld in 2014, said Wisconsin Revenue Secretary Richard Chandler during a Monday morning visit to River Falls.
Chandler said his department did the two things the other state demanded to reinstate reciprocity and then Minnesota changed the rules.
He said Minnesota, which has been raising taxes while Wisconsin has been lowering them, is demanding a $6 million “ransom” to reinstate the reciprocity policy that was in place for 41 years before Minnesota’s former governor, Tim Pawlenty, scrapped it in 2009.
“For most people, the dollar amount worked out the same either way,” said Chandler. “It’s just that they have the inconvenience of filing two tax returns rather than one.”
Chandler and Deputy Revenue Secretary Jack Jablonski, former chief of staff to state Sen. Sheila Harsdorf, stopped in River Falls ahead of a moderated conversation on the two states’ tax approaches scheduled for noon Monday at the Humphrey School of Public Affairs in Minneapolis.
“It should be interesting because we really are taking diametrically different approaches to taxing,” said Chandler of the Humphrey forum. He said Wisconsin is reducing, and Minnesota is increasing taxes.
Gov. Scott Walker has made about $1.4 billion in tax cuts, including decreases in personal income taxes, said Chandler.
“We think we’re really headed in the right direction,” the revenue secretary said. “Minnesota is headed in the wrong direction.”
He claims even some Minnesota lawmakers have buyer’s remorse. “In Minnesota, legislators aren’t bragging about what they did” when faced, as other states were, with revenue shortages, said Chandler.
Under reciprocity, employers in one state would withhold taxes from paychecks of their workers who live in the other state and send the money to the employee’s state of residence. Once tax returns were filed, the two states settled up.
Because more Wisconsin residents worked in Minnesota than the other way around, Wisconsin always ended up owing Minnesota.
Even though Wisconsin paid interest for the lag time, Pawlenty looked at the delay as a cash-flow problem and cancelled reciprocity.
For more please read the Oct. 10 print version of the Herald.