Australians love to whinge about our bust federal system. It is a national sport where we stand around with hands in pockets and call out “Aorta!”

“Aorta deregulate!”

“Aorta fund schools!

“Aorta cut taxes!”

“Aorta build roads!

Consider our public hospitals – which always seem in crisis, despite the good outcomes and the rivers of gold poured into them.

‘The feds don’t give us enough money,’ the States say.

‘The states mis-spend the billions and billions we give them,’ the Commonwealth retorts.

The lack of accountability for this fundamental and expensive service drives voters nuts. Citizens wanting to change either the poor service or high cost are going to vote… For who? At which level?

Every politician is cloaked in an alibi of voter confusion. This bug or feature is no accident.

“The lines of responsibility have become increasingly blurred. The principle of subsidiarity has been lost in many cases, and this has resulted in inefficiency and buck-passing between jurisdictions,” former SA Premier John Bannon told the Institute of Public Administration national conference last week.

Subsidiarity is the useful principle that activity should be devolved to the lowest practical level – closest to the people – a quality now sadly lost.

The key is the mis-match between Commonwealth taxes and the States’ spending.

Bannon looked at state and territory revenue, much of which comes from payroll tax, which he described as a “regressive … tax on employment”. Almost a quarter comes from the much-maligned stamp duty, conveyances and insurance levies that Bannon (and many other commentators) consider “inefficient barriers to economic activity”.
“The limitations of what the states can do, particularly under the impact of some of the rulings of the High Court in the late 1980s and early 1990s, has been quite profound,” he said. “They really just don’t have the means and ability to do anything seriously of their own right, which is not to say they can’t, and land tax has been pointed out as one that they possibly can.”

Politicians say they fear a backlash from wealthy landowners over enlarging the best revenue base available, land tax. Perhaps nested in that is the political concern voters could vote out poor performance if each level of government had clear responsibility for both their revenue and spending.

John Bannon is right to hammer bad state taxes. Payroll Tax eats up wages and Stamp Duty traps people in and out of housing. State Land Tax hurts no one, except politicians craving a quiet life.