Published on 01 Jul 07
by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
The state of the federation – a perennial issue – has recently been put under the spotlight by federal government policies ranging from industrial relations to education and water. One key issue is the increased centralisation of power, views on which differ, with some seeing nothing to regret in the diminished role of the states. Others, however, see sufficient economic and social benefits in the federation to make it worth saving from the inexorable drift of policy power from the states to the federal government. In this context, it is timely to reconsider the fiscal dimension of Australian federalism. Although it might be tempting to think that Commonwealth-State financial relations were settled once and for all by the 1999 Intergovernmental Agreement that allocated all of the GST revenue to the states, this is far from the case. The GST agreement was beneficial as a national tax reform exercise but has not restored state financial autonomy. For this reason, options for reducing state dependence on Commonwealth grants need to be considered. a state income tax – although by no means a new idea – is one such option.
Senior Fellow, Centre for Independent Studies, Sydney
Current at 1 March 2011