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ST. PAUL - Minnesota officials are canceling an agreement with Wisconsin that allowed residents of one state to file a single state income tax return if they worked across the border.

The cancellation stands to affect 33,500 Wisconsin taxpayers and only 13,000 Minnesota residents. Many western Wisconsin residents travel to the Twin Cities for work, while many residents farther north work in Duluth.

The move comes about six months after Govs. Tim Pawlenty of Minnesota and Jim Doyle of Wisconsin outlined an ambitious plan to collaborate on everything from making license plates to inspecting milk trucks.

Minnesota Revenue Commissioner Ward Einess said the states couldn't agree on speeding up Wisconsin's tax payment to Minnesota. Scrapping the pact will boost Minnesota's two-year budget by an estimated $131 million, mainly as taxes from Wisconsin residents come in faster. "We just weren't able to reach an agreement," Einess said. "We just couldn't quite bridge the fiscal divide."

Wisconsin Department of Revenue Secretary Roger M. Ervin said Minnesota's move was unfortunate. "The Wisconsin Department of Revenue has worked cooperatively with the Minnesota Department of Revenue on this agreement since 1967, and this outcome is disappointing," he said in a statement.

Pawlenty warned Doyle in June to speed up its payment to Minnesota or risk losing the tax agreement. Both states have been grappling with severe deficits.

The cancellation of the tax agreement runs counter to the neighbors' plans to work together. The governors originally put the savings from that effort at $10 million apiece, but an Associated Press review found roughly $100,000 of savings after the first five months.

Ervin and Einess both said the growth in electronic filing should make the transition easier for taxpayers.

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