The latest economic update from Minnesota Management and Budget says the state of Wisconsin has not paid the state's final tax reciprocity payment to the state of Minnesota. The update says Minnesota is waiting for $58 million from their neighbors to the east.
"Income tax reciprocity receipts were $58 million less than projected as Minnesota has yet to receive the final settle-up payment from the state of Wisconsin following the termination of the agreement that simplified filing for taxpayers who live in one state and work in another," the report said.
A spokesman with Minnesota Management and Budget says they have not had any formal communication with officials from Wisconsin. He referred calls to the Minnesota Department of Revenue, who are still checking into the issue.
For 40 years, Minnesota and Wisconsin allowed for reciprocity so people who live in one state but work in another didn't have to file tax returns in each state. Gov. Pawlenty ended the agreement in 2009 because he wanted Wisconsin to speed up payments to Minnesota. He was banking on the funds to help balance the state's budget. His decision to end the reciprocity agreement meant Minnesota was set to gain as much as $131 million from Wisconsin in the current budget cycle.
I contacted the state of Wisconsin's Revenue Department to see why the payment hasn't been made. An official there sent this written statement from Richard Chandler, the Wisconsin Secretary of Revenue:
"Minnesota unilaterally ended the tax reciprocity agreement with Wisconsin 15 months ago, which appears to have led to a communications breakdown between past administrations. Our new administration, under Governor Walker's leadership, is dedicated to working in good faith with our Minnesota partners, and that includes reviewing how to best meet previous payment agreements. We look forward to working with Minnesota to fix the broken agreement so taxpayers from both states can more easily file future tax returns."
A spokeswoman for Chandler says Chandler will review the payment agreement to "determine if a payment is due and the amount." She added that Chandler and WI Gov. Scott Walker want to "fix the agreement."
One issue that could be complicating matters is an issue that Minnesota policy makers are all too familiar with: Cash flow. Wisconsin's Department of Administration released a report in late December saying Wisconsin could face severe cash flow problems in January.
No word on if or when the payment will be made.