A small suggestion from Tasmania this week seemed a beacon of good sense in a sea of inertia on tax and inter-government relations in general.
The Royal Automobile Club of Tasmania called for a national driver’s licence to replace the eight licences we have now.
The primary aim was to standardise driver training and improve road safety, but the idea also has obvious merit on the grounds of administrative efficiency and convenience for people moving interstate.
Novice drivers in Tasmania do a minimum of 60 hours driving before they can sit for their full licence. In Victoria it is 120 hours and in Queensland zero. In the ACT the learner has an option of a government test or a training course with an accredited instructor.
The club points out that drivers of heavy vehicles have to sit a national test, so why not all drivers?
It invites the obvious question, why not have national vehicle registration as well?
Indeed, you can look at nearly every facet of state government in Australia and the arguments for making something either national or more local are fairly compelling. Yet the states lumber on.
This week the NSW Treasurer, Michael Costa, repeated his suggestion that the national government take over the bulk of health from the states in a general call for a better tax arrangement between the Commonwealth and the states.
The ACT Chief Minister, Jon Stanhope, lamented the lack of a solid tax base in the ACT.
But the states are unlikely to agree to a national licence and registration scheme, even though it is most likely their driving populations would welcome it, because it would be yet another revenue source being handed to the Commonwealth which would then dish it back to the states on Commonwealth terms.
The Commonwealth raises 75 per cent of the total state-and-Commonwealth revenue, yet it spends just 57 per cent of it. More than half the revenue of some states and territories comes in the form of grants from the Commonwealth.
This vertical fiscal imbalance arises because the High Court allowed the Commonwealth to take over income tax in World War II, and the Commonwealth has never allowed the states to resume taxing income. Also, the Constitution says excise taxes are the exclusive power of the Commonwealth and the High Court has interpreted “excise” very widely so as to wipe out state taxes on tobacco, alcohol and petrol and prohibit the states from raising a GST.
So the blame and name-calling game goes on. The states say education, health and transport falter because the Commonwealth is too stingy. The Commonwealth says it is because the states mismanage and spend money on the wrong things.
The so-called tax debate over the past couple of weeks shows nothing is going to change.
The healthy surpluses in the Commonwealth budget are not going to health, education and infrastructure. Instead, they will go to tax cuts, and inefficient tax cuts at that. There may be some marginal tinkering with the underlying system, but no wholesale change.
In particular, the absurd family-payments system will stay in place. The Government will continue to raise tax from families, churn the money through an expensive bureaucratic process and hand it back in the form of family benefits – some not means-tested and going to wealthy families. In doing so, it will continue with a system that provides a huge disincentive for women to get back into the work force. This is because they lose up to 60 cents in extra dollars earned in tax and loss of family benefits, aside from childcare and other costs associated with going to work.
It is good ideology for the Howard Government because it keeps women at home with the kids. It is good vote buying because voters think they are getting something when the government cheque arrives. It would be much simpler and more efficient just to give tax deductions for children, but not as politically advantageous.
Further, the general tax cuts next Budget will just be money given back which was taken earlier by bracket creep as inflation pushes people into higher tax brackets, but the voters will think well of it. And the states can be blamed for poor health, education and roads.
The states can do nothing about it. As part of the deal to get the revenue from the GST, they have agreed to abolish a lot of property and transaction taxes. And they have no power to increase the GST themselves.
As Federal Treasurer Peter Costello said, an increase in the GST is ruled out for this budget. He has the power to do that because it is not a state tax.
So of what use are the states, other than as mis-managers of federal money?
Well, they can innovate. And the traffic example we began with is a good example. The fact different states have different systems indicated some have innovated. They have tried log-book systems to replace the single test.
Sure, after the event it seems obvious to bring all jurisdictions up to best practice, but in the lead up it is often the case that a small jurisdiction can innovate when a national government might be too timid. When the benefits in one jurisdiction are seen, others follow: Tasmania with daylight saving; Victoria with seat belts and random breath-testing; the ACT with same-sex civil unions and so on.
The other useful function of the states is to test governmental effectiveness through comparisons. School retention rates, costs of hospital beds, crime rates and so on can be measured to see which states are doing best and why, so others might improve.
But you have to wonder whether that is worth the inefficiency and political buck-passing that goes on under the present Commonwealth-state financial arrangements. It is just too easy for the Commonwealth to do what Costello will do next Budget: throw a bit of bracket-creep money back to the voters and blame the states for poor services.