“We had prom night in Congress and everyone got along,” the woman told me. “Do you suppose we could get the Governors to do the same and work together?”
The woman worked in Minnesota and lived in Wisconsin. She was doing her taxes and asked me to encourage the two states to renew their “tax reciprocity” agreement.
For forty years Wisconsin and Minnesota had an income tax agreement to help make it easier for people who live in one state but work in another to file their state taxes. Residents filed in their own state and the two states worked out the difference. Wisconsin still has such an agreement with Illinois, Indiana, Kentucky and Michigan.
This good will between Minnesota and Wisconsin ended in 2009.
Sounding much like a divorce, the Star Tribune cited “irreconcilable differences” that led the Minnesota Governor to dissolve the agreement.
About two and half times as many Wisconsinites work in Minnesota as the other way around. Because of this Wisconsin owed money to Minnesota. Budget problems in both states led to the impasse that dissolved the agreement.
Now Wisconsin owes Minnesota $58 million. The bill was due in December. Because of its non-payment the state of Wisconsin is running up interest charges of more than $4,500 a day.
Not only is the state of Wisconsin paying for the lapsed agreement, so are individual tax payers. Many of our friends and neighbors who work in one state and live in the other face the hassle of filing taxes in two states. For Minnesota residents working in Wisconsin - because Wisconsin has a higher income tax rate - more of their money is going to taxes; sometimes as much as $300 a month.
I was contacted by constituents and Minnesota residents who work in Wisconsin asking me to resolve the situation. I and other legislators went so far as to pass a bill to encourage the two sides to come to the table. But it’s hard to make a Governor do something he doesn’t want to do.
Fast forward to 2011 - two new Governors are in town and both say they are dedicated to working together. I joined my Western Wisconsin colleagues in an official request that Governor Walker work to reinstate income tax reciprocity with Minnesota. Faced with increasing interest charges and a tight budget, the Governor seems to have placed renewing ties with Minnesota near the top of his list.
Wisconsin’s new Governor made national news in his efforts to lure businesses from neighboring states. Rather than compete with our neighboring states over a diminishing pot of potential large manufacturers who might want to relocate in the Upper Midwest, it makes more sense for our new Midwestern Governors to work together to improve the economic climate for the entire region.
Resolving the tax reciprocity dispute would be a great first step.
Richard Longworth in the book Caught in the Middle argues our state boundary lines are standing in the way of our economic progress. And reaching across state lines can help the entire Midwest region thrive.
Minnesota’s economic growth has profound impact on Western Wisconsin. With almost two thirds of its population in and around the twin cities, what happens in Minneapolis - St Paul not only drives the state, it drives the region. And what happens in the Chicago metro area influences the southeast part of our state.
“Working together,” Longworth reasons, “states could play to their strengths. But in the Midwest, state governments are paid not to cooperate. No governor ever gets credit for a factory that opens in a neighboring state. No legislature brags about jobs created across the state line, even if some of those jobs go to his constituents.”
Competition has long been a part of our culture. But so has cooperation. While our football teams ferociously compete, we must all come together in matters of community good, in our own state and across state lines.
With the football season over and the Brett Favre situation resolved, Governor Walker, why not invite Governor Dayton to dinner?