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How Illinois' Budget Negatively Impacts Wisconsin's

Wisconsin's state budget impasse just got $51 million harder to solve thanks to the tax increases that neighboring Illinois enacted to finally pass its spending plan, state lawmakers learned Tuesday.

Wisconsin's state budget impasse just got $51 million harder to solve thanks to the tax increases that neighboring Illinois enacted to finally pass its spending plan, state lawmakers learned Tuesday.

The hit to Wisconsin comes because of higher income tax credits that people who live in Wisconsin and work in Illinois will be able to file, the nonpartisan Legislative Fiscal Bureau said. Wisconsin will also have to make higher payments to Illinois under an income tax reciprocity deal, the Fiscal Bureau said.

The bad news came as private talks among Republicans about how to plug a $1 billion road-funding shortfall showed few signs of progress. Republican legislative leaders and Gov. Scott Walker were scheduled to talk for the first time in two weeks on Wednesday.

Under the reciprocity agreement, people who live in Wisconsin but work in Illinois only file taxes in Wisconsin. The state then pays Illinois the difference of what would have been owed. Because taxes are going up in Illinois, the state's payment under that deal will increase by more than $20 million, the Fiscal Bureau said.

The Illinois tax changes will also result in Wisconsin residents claiming $31 million more in credits for taxes paid in other states, the Fiscal Bureau said.

Caroline Cournoyer is GOVERNING's senior web editor.
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