Hotdish: Minnesota hopes for tax deal with Wisconsin

  • Updated: March 9, 2013 - 11:07 PM
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The Stillwater Lift Bridge from the Wisconsin side of the St. Croix River, traveling west back to Stillwater.

Photo: David Joles, Star Tribune

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Jim Ragsdale

There is nothing in the historical record to indicate that William Holcomb of Stillwater or Stephen Douglas of Illinois were worried about tax reciprocity when they did battle over the Wisconsin-Minnesota border in the 1840s.

Holcomb, advocate of pushing Wisconsin’s line to the east, and Douglas, then head of the Territorial Committee in the U.S. House of Representatives, were part of a dramatic pre-Civil War boundary dispute that ended at the St. Croix and Mississippi rivers.

Today, with instant communication and less facial hair, the battle continues. The fact that the residents of western Wisconsin counties tend to look west, as Holcomb predicted they would, makes it very hard for Minnesota and Wisconsin to give river-crossing workers the convenience of filing only one state income-tax form.

The bureaucrats call it “tax reciprocity,” and from 1968 to 2009 the convenience existed.

What sounds simple turns out to be as confounding as the boundary battle.

“There are three variables,” said Myron Frans, Minnesota’s revenue commissioner. “Population differential, income tax rate differential, and tax credit differential.”

Translation: More people in St. Croix and Pierce counties in Wisconsin head west to earn their daily bread than the other way around.

The imbalance means Wisconsin taxpayers have to reimburse Minnesota taxpayers to make the system work — both states agree on that. But the amount and timing of those payments so irked former Gov. Tim Pawlenty that he ended the convenience in 2009.

In trying to put the deal back together, Minnesota produced a study that found in tax year 2011, there were 55,743 returns filed by Wisconsin residents who worked in Minnesota, compared with 23,940 filed by Minnesota residents who worked in Wisconsin. Minnesota officials say that the North Star State would have lost nearly $74 million in 2011 with a reciprocity pact and no payment to Minnesota.

In a letter to his counterpart, Wisconsin Revenue Secretary Richard Chandler, Frans suggested that Wisconsin should make quarterly payments totaling $85 million in tax year 2014, adjusted upward for inflation and population.

Chandler agrees to quarterly payments but believes Minnesota is adding $6 million too much to Wisconsin’s tab. He calls that “unreasonable and not feasible” and is in effect asking Wisconsin “to send $6 million to Minnesota to reverse a tax increase.” Frans defends the Minnesota position as a fair accounting.

Meetings are to be held.

In the meantime both sides might benefit by revisiting the real border battle, chronicled by William Lass for Minnesota History Magazine. It concludes with a farewell to the eastern bank of the St. Croix by James M. Goodhue in the Minnesota Pioneer newspaper.

“As for us, in Minnesota, who have been carried into Abraham’s bosom, we can only look down with compassion upon our neighbors across the great gulf of the Saint Croix and pray for their safe deliverance.”

Coming up

On Tuesday, the first hearing on a bill to legalize same-sex marriage will be held by the House Civil Law Committee, Room 10, State Office Building, 8:15 a.m. Tickets will be given out to speakers and others on a first-come, first-served basis; overflow seating will be provided in Room 181.

Deadlines looming

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