“The federal government uses a definition of fair that would make Marx proud”.

Everything about the Albanese government would make Marx proud.

Victoria should not be compensated for all the money it wasted during Covid: businesses ruined. Lock downs. Police bashing people on the streets.

Andrews should be stripped of his pension, and everything he owns should be taken as some compensation for what he did.

"But surely fair is distributing the GST exactly in proportion to either the population of each state, or in proportion to where it is generated, which are close to the same thing."

Let's dispense with the notion that the ATO is in a position to know where the GST is generated. Take a few examples.
*I, in NSW, buy a product online from a Victorian site. Where is the GST generated?
*I, a NSWelshman, buy a coffee while visiting Melbourne. Which state gets the credit for that GST?
* A larger enterprise headquartered in Sydney but with outlets throughout the country pays its GST. Is it required to break that down by state or does NSW get the full credit?

This is a recipe for regulatory overload and would see states competing to HQ organisation with a national footprint just to get their GST credit.



Equally, if the GST is distributed based on population, it would perversely offer an incentive for states to take on more people at the very time when the entire nation appears to be clamouring for the opposite.

There is no easy solution to this and certainly no FAIR solution that is objectively fair to all concerned. Fair is in the eye of the beholder or more precisely in the back pocket of the various state treasurers. One of the things we have to do here is to take away the ability of the politicians and the bureaucracy to make value judgements. How is it that the ACT gets share greater than their population share would indicate if it isn't for bureaucrats putting their figure on the scales.

Given that there is no 'right' solution to this, I'd pump for the breakdown to be based on population but with the proviso that it is only adjusted each decade so as to take away the incentive to 'chase' more people to get more funds.

The article makes some good points. Our system aims to ensure every state can deliver the average level of services if it makes the average effort to raise taxes and operates at average efficiency. As Graham says, this is closer to the Marxist aim of “from each according to their ability, to each according to their need” than the more familiar progressive tax system in which high income earners pay proportionately more tax than low income earners, but not so much that they are no better off. Many federal systems worldwide have transfers from rich to poor jurisdictions, but not to the extent we do in Australia. It’s a bit like having a 100% income tax on wages above average.

As Graham says, this distorts incentives, because states are discouraged from doing things that would increase revenue if much of that revenue is lost through lower grants. States that don’t exploit their natural resources, e.g. by fracking bans that discourage energy production, are compensated by GST from states that do.

There are other issues. One thing even Marx didn’t anticipate is that to operate on the principle of “from each according to their ability, to each according to their need” you have to know what everyone’s abilities and needs actually are. The result is a mind-bogglingly complex Commonwealth Grants Commission process that looks into the minutiae of “needs” in every area of government spending.

A further problem that is particularly important here in WA is the treatment of royalties. The grants commission treats royalties like taxes, but conceptually they are closer to a sales price –compensation to owners of minerals for the extraction and sale of non-renewable resources. When West Australians get $10 in royalties for a tonne of iron ore exported, they are not $10 better off; they have ten more dollars but a tonne less of iron ore. Royalties should be treated like asset sales, not tax revenue. Revenue from asset sales is not redistributed under the CGT process. The Queensland government ran this argument to the Productivity Commission a few years ago. It is worth re-visiting.

The Federal Labor government can be proud of the fact Australia under its economic management has managed to maintain its AAA credit rating with all major agencies, only one of ten countries to do so. This is despite the previous Coalition government spending like drunken sailors when in office! In real terms that AAA rating results in a saving of about $1 billion p.a through lower interest payments.

Unfortunate the LNP government in Queensland under David Crisafulli, who I don't believe is a bad premier, is catching the Federal Coalition disease of spend, spend, spend, like drunken sailors on frivolous projects such as the 2032 Olympics and locking children up.

As for the GST, we know Little Johnny Howard lied when he promised to never introduce a GST, then did exactly that. If the Conservatives win office at the next election, one of their first acts will be to increase the GST to 15%. If they're in coalition with One Nation who are clueless when it comes to economic management, then the sky's the limit for taxes and debt.

When Peter Costello announced the introduction of the GST, I remember him saying all the money collected would go back to the states.
I think everybody thought that meant that any GST collected would go back to the state where it was collected.
I don't recall him saying there would be a formula, taking GST from some states and giving it to others.
Did he say that?
If not, was he was being deceptive and sneaky?
If he did, should he have emphasised it more?