Government power is decided by money. The ability to collect money as well as hand it out. The Australian federal government is a big collector of tax money, in 2000 consuming 26% of Australia's GDP in tax. It is also a big spender of money, with 25.3% of the GDP being handed out by the federal government in 2000.
The Australian federal government has polluted our system of federalism by stealing from the States a government's autonomous right to tax for themselves. This not only leads to over-taxation but entropy of power to the central government. Canberra not only dictates policy, but funds it as well. The States are nothing more than a popularly elected bureaucracy to disburse federal funds.
Fortunately NSW never got over the fact that it didn't become "Australia", and on the western coast of the continent there are the Westralians, constantly suspicious of the t'othersiders, especially the ones in Canberra. Bob Carr and Geoff Gallop are both
holding out
for the moment.
If Carr and Gallop give in, they will effectively be handing over any last resistance to centralist principles. Australia will devolve into a Westminster system like Britain's where London dominates and nothing lies between Parliament and the local councils. The fact remains, the States need to take back from the Federal government their ability to tax.
The Failure of Federation
The failure of Federation was NSW's fault. The Australian constitution is devoid of enlightenment innovations such as a Bill of Rights, or an elected Executive. The "bearded men" knew of many of the flaws of the system and even tried to add in a few of their own. Griffiths for instance in one draft making the judicial arm subject to the authority of the legislature. Deakin was aware of the flawed federalism in the constitution, George Williams comments;
These can be traced back to when the Constitution came into force in 1901 when Alfred Deakin, one of Australia's first Prime Ministers, predicted that the states would find themselves "legally free, but financially bound to the chariot wheels of the Central Government".NSW was the strongest colony of the time. It could have placed its stamp on the constitution, instead the Deakinists held sway and the flaws in the Constitution and Australian federal government continue to dog the country. The Deakinist world-view of Australia was an inefficient one. As Prime Minister he enacted, protectionism, discriminative immigration policy and centralised government. The first one took eighty years to get rid of, the second seventy years and the final we are still trying to disentangle from. The Australian High Court has also been activist. Deciding for themselves that they, and they alone had the authority to turn the Australian Constitution into a living breathing document. The corporation's power is an example of this activism. The Australian Constitution has proven difficult to change through the strict referendum and majority system. We lag behind the Swiss in this area of Constitutional responsiveness. Even so the static nature of Australian Constitutional change does not give the High Court the right to modify the meaning of the Constitution and federalism without public consent. Emergency In 1942 the federal government decided it needed more money to pursue the war against Japan and Germany. The demanded and got the ability to tax income. Previous to this the Federal Government was unable to tax income. Several states opposed the legislation, taking it to the High Court, but they lost. War is always a poor time for liberty, and political opportunists constantly use it to accrue more powers around themselves. James Madison had wise words on this subject;
In no part of the [US] constitution is more wisdom to be found, than in the clause which confides the question of war or peace to the legislature, and not to the executive department ... In war, a physical force is to be created, and it is the executive will, which is to direct it. In war, the public treasures are to be unlocked; and it s the executive hand which is to dispense them. In war, the honours and emoluments of office are to be multiplied; and it is the executive patronage under which they are to be enjoyed. It is in war, finally, that laurels are to be gathered; and it is the executive brow they are to encircle. The strongest passions and the most dangerous weaknesses of the human breast; ambition, avarice, vanity, the honourable or venial love of fame, are all in conspiracy against the desire and duty of peace.To Madison's world-view, war and centralising power undermined the very foundations of free government. We are saying the ripples, if not the super-waves, of the collapsing of income tax power to the Federal Government today. The Australian Federal government over-taxes in order to impose its will on the states. Cockroaches and Sandgropers In the 1930s, the NSW Premier was Jack Lang. He was elected on a platform that included bashing the Bankers in London for being unsympathetic and out of touch with the realities of depression era Australia. Lang was fortunate he was given the perfect foil in the imperialistic arrogance of Sir Otto Neidermeyer. NSW was still carrying loans to Britain from the First World War at higher rates of interest than they were paying to other lenders, such as the United States. Lang decided that he would default on the loans until he got better terms from the London bankers. The problem from the Federal Government's point of view was that they had under-written those loans. If NSW defaulted, they were liable for those payments. Once again the pollution of the federal system led to conflict between the Federal Government and the States; in this case though, it nearly ended in Civil War. The Prime Minister, Joe Lyons, decided he would take NSW's income tax rolls and do the taxing instead of NSW. But those rolls had been hidden, as had any cash NSW had in banks. Lyons was stuck, unable to get money out of NSW, and with Lang not changing his mind on defaulting. Lyons readied the Australian military to take government buildings in Sydney, while the NSW Police Force backed Lang to the hilt. Militias began forming all over NSW, some pro-commonwealth and some pro-state. In the end the ambiguities of the Westminster system and reserve powers defused the situation. The Governor of NSW, Sir Phillip Game sacked the Lang government. It was most likely unconstitutional to do so. All it would have taken was for Lang to not recognize Game's authority and civil war would have descending. Lang said the words, "I am a free man, the bastards sacked me." There was no blood on the wattle that day. We Secede! The Western Australians were reluctant participants in Federation, concerned about the concentration of power in the Eastern States. When Western Australia held the referendum to join Federation, they were the last colony to do so, with the other colonies already approving their referendums. The regional streak is strong in Western Australia, in 1933 the state voted to secede from the Commonwealth of Australia. To many Westralians, the federal government and Canberra were remote, far from them, and disconnected from the issues of the state. Several Leagues formed to promote secession of Australian unity. The Dominion League led the secession campaign. The vote on secession was overwhelmingly in favour of seceding. The only district to vote no was the goldfields, presumably because of an influx of eastern staters in the gold-rush. Ironically the voters also removed the incumbant secessionist government from parliament and replaced it with a federalist one. A petition was presented to Parliament in Britain, but British officials claimed they were unable to act without the Federal Government in Australia approving any secession. This left the Western Australian secessionist nowhere to go, other than a straight out repudiation of the Australian Constitution. From the song, " Westralia Free ";
Plains of our pastures boundless,By being ignored by Australian Federal Parliament, and politely fobbed off by the British Parliament, Western Australia was forced to seek its style of freedom within the Australian Commonwealth. Claiming State Power Back George Williams writes that the States may have a way through the corporations law to claw back against the federal government. The law comes up for review after five years;
Seas of our rainbow'd pearl,
Destiny is your breezes
Liberty's flag unfurl!
See its folds flung wide
And the challenge cried
"On to conquer ride,
"Wave o'er Westralia free!"
Land of the karri spring,
Land of the wheat and vine,
Aye to thy sons and daughters
Faith's altar and Love's shrine.
Lo! Our vows were sworn,
And the triumph born
In a nation's dawn,
"We made Westralia free."
There is however one area in which the Commonwealth does rely upon the states. The states have referred power to the Commonwealth to ensure that the Commonwealth has the power to enact key national laws. Without such power, the coverage of these laws would be incomplete, leading to confusion and extra cost. Recent referrals include giving the Commonwealth power over de facto relationships and terrorism offences. The referral most likely to be contentious is that by the states over corporations law.The aggressor here is the Commonwealth government. It is the one that needs its wings clipped. We can start by not allowing the Federal Government to tax for the states. Ken Parish has written that Federal Government taking over initial income tax powers is reversible and could be the basis for the States taking back control of their own taxation . Parish writes;
Over 1999 and 2000 High Court decisions led to instability, problems with enforcement and a lack of confidence in the previous corporations law, which covered the creation and regulation of companies across Australia. It is generally accepted that Australia needs a national law on this topic. The states recognised this and in 2001 referred power to the Commonwealth. However, they did so in a way that will cease after five years. After that time, unless the states renew the grant of power, the uncertainty that plagued corporations law in Australia will return and business will suffer. Unfortunately for the Commonwealth, it will be seeking a further referral of this power at the same time as a new deal on GST revenues and a national industrial relations law.
The States should all agree to set up a Joint State Tax Office that would levy a uniform state income tax on all Australian individuals and companies. The rate should be set so that it covers all state spending needs, so that the States can afford to tell the Commonwealth to shove its GST revenue and section 96 tied grants where the sun don't shine. The Commonwealth would then be under intolerable pressure to reduce its own tax take back to the level required to fund only it own spending needs. It should be fairly easy for people to see which polity was guilty of greed and duplicity in that situation, and it wouldn't be the States.Governments don't let other governments tax for them. A government is also only supposed to tax for its needs and nothing more. The federal government collecting income and sales tax for the states is a gross perversion of the principle of government. The Nuclear Option The states other than NSW and Western Australia have already given in to Costello. So the larger states like Victoria and Queensland are going to be no help in forming a power-block against the Federal Government. NSW will probably have to show some of the guts and gumption that it was incapable of in the 1880s. Governments are addicted to, get fat, get wealthy and get powerful on tax collection. Economically NSW is the biggest state in Australia, and the tick of federal government is getting fattest on NSW's neck. The NSW 2004-2005 Budget contains revenue from;
-
Taxation
- 5,482,000,000 Stamp Duties
- 4,696,000,000 Payroll Tax
- 1,448,000,000 Land Tax
- 1,243,000,000 Taxes on Motor Vehicles
- 1,404,000,000 Gambling and Betting
- 1,247,000,000 Other
-
Commonwealth Grants
- 9,648,000,000 GST Revenue Grants
- ...96,000,000 GST deferral
- ..260,000,000 National Completion Policy Payments
- 5,944,000,000 Specific Purpose Payments
-
Other
- 1,670,000,000 Dividends
- ..171,000,000 Licenses
- ..114,000,000 Fees
- ..242,000,000 Fines
- ..300,000,000 Royalties
- ...53,000,000 Fire Brigade Levy on Local Government
- ...98,000,000 Other
- 15,520,000,000 State Taxation
- 15,760,000,000 Commonwealth Grants
- ...979,000,000 Other
- 128,551,645,861 Individuals
- 107,780,949,517 Companies (private and public)
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