The States, Income Tax And A Line Of Accountability

As the public reaction to Coaltion the budget continues the voice of Professor Kenneth Wiltshire, reported in The Australian, 16 May, stood out. Re: the current States vs Canberra stoush, he says the States should reclaim income tax powers with Canberra taking responsibility for the GST.

Some Little Known History

• Australia is the only federation in the world where states do not levy an income tax
• Under our constitution the States own income tax power jointly with the Commonwealth but today blame and/or praise for government services is lost in the jungle of overlap and duplication
• The Commonwealth took over State taxation powers during World War 11, producing a serious fault in our taxation system by breaking the line of accountability:

“the governments that spend our taxes are not the governments that have to raise the revenue.”

Canada And Germany – Good Models

“In Canada, the Provinces simply piggyback their income taxes onto the federal one and set their own rates for the additional amount or rebate to be applied to their citizens.”

“A more interesting example is Germany, where the income tax base (and other tax bases) are shared between the levels of government and the shares are reviewed periodically to see whether the evidence suggests a change in the percentage going to each level of government in the context of its circumstances.” The Australian, 16 May 2014.

Fair and rational

Post-Budget Comments

I am hearing ‘experts’ speak of the budget’s lack of vision and longterm structural reform. We do see

“a lot of good medium-term things that will be good for the Budget..

BUT

there are just lots of little, mean cuts to families, to older Australians and they’re all just things that will niggle away and I think that’s probably the bad bit..

It’s almost like Swiss cheese: there are holes. You can see what they would have done if only they hadn’t promised not to.” Lateline

.

Back To Our Founding Fathers

The suggestion is:

“The States take back their income tax powers and the Commonwealth takes back complete responsibility for the GST giving direct accountability of every government to its taxpayers…the way the federation was designed in the first place!”

Thank you Professor!