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Attention border commuters: Your tax filing may change

State Sen. Sheila Harsdorf (R-River Falls) is still working on a compromise, but the end of tax reciprocity looms and could force tens of thousands of Wisconsin and Minnesota commuters to pay more in 2011 to file their tax returns and, in some cases, pay more in state income taxes.

Harsdorf and other area lawmakers, including Kitty Rhoades and John Murtha, have met with some of the their legislative counterparts in Minnesota. Both groups say they want to keep some form of tax reciprocity.

The 41-year-agreement allows those working across the state border to file income tax returns in the state where they live. Without the agreement, those workers would have to file tax returns in both states.

Wisconsin makes annual payments plus interest to Minnesota because more Wisconsinites than Minnesotans have cross-border jobs.

Last December Wisconsin paid Minnesota $75.8 million, with an 8% interest rate, for 2007 taxes.

Minnesota Gov. Tim Pawlenty, hoping to help plug his state's big budget hole last summer, demanded an earlier payment from Wisconsin.

Officials from both states tried to come up with a figure for one early payment but couldn't agree. Minnesota wanted more money; Wisconsin offered less.

Harsdorf said Wisconsin and Minnesota lawmakers can only do so much because the problem is with the executive branch, not the Legislature.

In the end, it's up to administrators for governors Pawlenty and Jim Doyle to restore tax reciprocity.

Earlier this fall in Hudson, Doyle said there's nothing more Wisconsin can do because "Minnesota has made the unilateral decision that they are going to eliminate it."

The continuing recession has also made it harder for both states to find common ground.

But Harsdorf said that greater effort from Wisconsin's executive branch is needed: "I don't sense a strong commitment on our side to work something out. Our administration needs to be there for that to change."

Check the Dec. 2 print edition of the River Falls Journal for more on this story.