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Tim Nelson
St. Paul, Minn.

Pawlenty says talks have begun for tax reciprocity deal

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Gov. Tim Pawlenty confirmed Friday that talks have begun between Minnesota and Wisconsin in settling a bill over a decades-old tax pact.

The two states have an income tax reciprocity agreement, which allows residents to pay income tax in only one state. However, Wisconsin currently takes up to 17 months to pay its residents' taxes to Minnesota and Pawlenty wants the state to agree to pay back the money faster, as part of his plan to balance the budget.

Pawlenty said the change would net Minnesota more than $100 million, but Wisconsin hasn't yet agreed to pay.

"The ace in the hole, so to speak, is that we can always end the agreement, and make sure we can get all the money we're owed on a timely basis from Wisconsin," Pawlenty said. "But we'd rather work it out with them on a cooperative basis and get a revised agreement."

About 57,000 Wisconsin residents work in Minnesota, and might have to pay higher taxes if a deal isn't struck.