Officials from Minnesota and Wisconsin may not agree on who to root for in sports, but they have high hopes of agreeing on how to tax their border-crossing citizens.

Border-area legislators and tax officials from the two states came together at the Minnesota state Capitol on Monday and expressed hopes that an agreement can be reached this year, in time for it to take effect for the 2013 tax year.

At issue is tax reciprocity -- the idea that workers who live in one state and work in another can file a single state tax return, rather than paying taxes in each state. Such an arrangement existed for more than four decades before Minnesota ended the agreement in 2009. Former Gov. Tim Pawlenty ended the agreement over concerns about delays in receiving payments from Wisconsin.

Because far more residents of Wisconsin cross the border to work than do Minnesota residents, Wisconsin had to reimburse Minnesota for income taxes collected from Minnesota workers. Pawlenty said during hard budget times, the delay in receiving payments from Wisconsin was not acceptable.

Minnesota Rep. Greg Davids, R-Preston, Chair of the House Taxes Committee, and Wisconsin Sen. Sheila Harsdorf, R-River Falls, co-chaired the meeting Monday. They said the plan is for staff from the two states to work on a plan to reinstate reciprocity for 2013. That would mean a fully-detailed agreement in time for businesses to be notified by Oct. 1. The group hopes to receive an update by mid-April.

Harsdorf said the current, two-state system, creates "an accounting nightmare" for businesses employing border-crossing workers. The officials estimated that currently, 60,000 Wisconsin residents work in Minnesota, and 20,000 Minnesota residents work in Wisconsin.

Minnesota border-area legislators said their constituents are waiting for reciprocity to be restored. Wisconsin legislators agreed, and said that the state's political turmoil will not affect work on this issue, which they said is bipartisan. Recall elections involving Wisconsin Gov. Scott Walker and four state senators are expected this summer.

 

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