Blame Canberra? Why should we?

Current formulas used to carve up the GST revenue take the wealth of states into account. The plan to devolve some power to the states is not unworkable, but it needs to be carefully thought through and executed by degrees.

One of the biggest tensions in last week’s budget was that it includes huge cuts to essential services, because we can’t afford them, but then promises regular income tax cuts to maintain a ‘tax cap’ of 23.9 per cent of GDP.

The principle at stake is that raising the total tax take too far would risk a fiscal drag that could crimp growth -- so collecting too much tax eventually becomes counterproductive as it strangles the goose that lays the golden egg.



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