The authors miss the real distinction between the two levels of government. In an economic sense the Commonwealth Government is sovereign as currency the issuer, the Sates are subservient.

Under the present situation the states have to raise or borrow the money they wish to spend. A Sovereign Government can spend first and then determine how much money has to be removed from circulation by way of tax and that should depend on the SG's two principal prescribed economic duties, maintaining high levels of employment and controlling inflation.

The SG's tax take should remove money likely to cause other problems such as house value inflation, a problem that amounts to the wealthier, older generations, taking the young family generation to the cleaners.

Australia needs to return to having a Loans Council which regulates total state and federal expenditure, mainly on infrastructure, to ensure the two SG duties are achieved.

In the period 2008-11 there were no shovel ready projects available hence the 'panic' induced schools and insulation stimulus programs. Despite the some hassles those programs achieved their main purpose, maintaining employment.

The December 2008 cash handout had an immediate effect as the first round of spending by individuals provided incomes that facilitated 2nd and nth round spending until all the handout money appeared as net savings or tax payments.Few people objected to what was the Labor Government's second, but slower acting, cash stimulus, the raising of the tax threshold to $18,200.

Payroll taxes and GST tend to be regressive and should be avoided. A Tobin tax, a tax on the parasitic speculation section of "market" makes much more sense.

Perhaps federation is kaput. Canada manages with federal and state taxes. States here could raise their own taxes instead of doing it under the guise of levies.

This all gets back to WA's lack of competent management in the first place. Here we have a state taking up nearly half the geographic space of the entire country, relying on mining as growth engine for the state and not developing enough diversity in their economy.
Now they cry poor to the chief house keeper (Federal government) that GST system is unfair to them. Oh the poor things, they must be utterly depressed!

The GST system works well for ALL Australians, should not be fiddled with for one of the wealthiest states in the country!

The only problem I have with Federation is that our flag is an embarrassment, get rid of that silly old union jack and show the world that Australia HAS grown up once and for all! Don't have to leave the Commonwealth of Nations. South Africa, India, Pakistan & Canada can do it, so why can't we?

God what utter twaddle.

If I, & many others, had even thought the GST distribution would be other than 100% back to those who paid it, we would have voted against it.

If we had realised it was going to be used to prop up the failed states of South Australia, & Tasmania, we would have been rioting in the street.

Here is the real problem. Two states refuse to harvest their huge natural resources, nuclear & timber. Instead of having to wear the result of their stupidity, some clown bureaucrats decide to hand them a life line, from the wealthy generated by Western Australia & to a lessor extent Queensland.

By funding their stupidity with other peoples earnings, we allow them to perpetuate their stupidity, & harm all Australians by the loss of export earnings, or paying for imports to replace our forgone harvest.

Until these states are made to suffer personally, the reduction in wealth they cause, they will continue the practice.

Interestingly some blame their saviour WA who's exports have supported the whole countries balance of payments for decades, for wanting a bit of the wealth they generated themselves.

What taxes should the states collect? Arguably none!

Given what they do is better done by a rationalized combination of a central government and enlarged local government.

And something we the people need to decide, rather than the current crop of control freaks who will if allowed, prevent any and all rationalization!

Local government and vastly more regional autonomy, could reduce government spending; and mostly on just ensuring its existence/on itself, by 70 billions per, and a direct funding model that eliminates the middle man fee taker (state governments) saving the tax payer as much as 30 billions per; or if you will an estimated sum total of around 100 billions per?

These ultra expensive debating societies are, I believe, compromised or corrupt or serially incompetent luxuries; or all the above, we simply can no longer afford; given debt and deficits going out as far as the eye can see!

Moreover, just eliminating an entirely unnecessary middle tier (roadblocks in the path of true progress), would finally allow us to decide who does what with the shrinking basket of money we collect!

And the money saved by rationalized government/ending the bucking passing blame shifting game; needs to be at the very heart of that process!

We could use some of those savings to upgrade our rail links, to allow rapid rail (300klms PH) to operate on existing rail lines?

And while that might incur some straightening and a few convenient tunnels/overpasses, [eliminate level crossings,] whats needed are engineered cambers on straightened corners, and stock proof fencing.

And the grass strips in the centre of multi-lane highways, could be used for high speed express monorails.

A federation fit for a purpose, would redesign us as a single nation competing with the world rather than each other!

And as a single nation with a truly rational national plan, replete with some long overdue visionary blue sky thinking powered by cooperative capitalism!

Arguably the very things that once made us the third wealthiest nation on the planet and a creditor one at that!

Let's go back there?
Rhrosty.

"Tobin tax", "twaddle", they're all talking past your valid point as to the proven most equitable and efficient of taxes, guys. Very good article. Commenters would do well to read it again with just some little comprehension.