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Lack of reciprocity creates problems during tax season

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La Crosse, WI (WXOW) -

LA CROSSE, Wis. (WXOW) – Tuesday is the deadline for residents to file income tax returns and for people living in Wisconsin but working in Minnesota, or vice versa, this time of year is always complicated and time consuming.

For 42 years, Wisconsin and Minnesota had a tax reciprocity agreement, meaning residents who may live in Wisconsin and work in Minnesota would only have to file one tax return and pay taxes in only one state.

Minnesota and Wisconsin ended their reciprocity agreement in 2010, as it historically resulted in revenue loss for Minnesota.

“There are so many people that cross into one state or the other. It would be helpful to simplify (this time of year) for them,” Franke & Turnbull Certified Public Accountant (C.P.A.) Jason Steinhoff said.

Steinhoff said even though tax reciprocity would make things simpler for him, but not having tax reciprocity has proven to be beneficial, as Steinhoff said more people seem to pay their fair share more often.

“Without reciprocity, there is probably more accurate tax reporting to the states,” Steinhoff said.

Without tax reciprocity though, interstate workers have to file extra tax returns, and pay more as well.

“We almost have a regional economy that’s being impacted in some senses an artificial border,” Wisconsin State Rep. Chris Danou said.

According to Danou, after Minnesota and Wisconsin ended their tax reciprocity agreement, more than 56,000 Wisconsin interstate workers were affected.

“When you think about this area—La Crescent, Winona, La Crosse, Buffalo County, Trempeleau County—they’re really almost one economy. In some senses, we need to move past the artificial distinctions of state borders and recognize it and be working in a more cooperative way,” Danou said.

Danou said Minnesota is less likely to agree on a new tax reciprocity agreement, because Minnesota has a lower tax rate, and it would likely leave Minnesota $6 million short in their state budget.

Danou said both Minnesota and Wisconsin should put aside their differences and “give a little to get a little”.

“We want to get to a point where this can be solved. I do think Minnesota needs to be flexible, also the Wisconsin Department of Revenue needs to be flexible,” Danou said.

Minnesota’s Budget Director said Minnesota would insist Wisconsin help make up the difference in the budget to restore the reciprocity agreement.

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