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The progressive case for decentralised taxation

By Grant Wyeth - posted Tuesday, 3 June 2014

In the press and on the street there has been a strong sense that the Abbott Government's proposed budget is unashamedly aimed at harming the groups in our society it doesn't like. With the prominence of this mood, we should really be questioning whether it is to our advantage to have a political structure that concentrates such power in one level of government.

Interestingly, an idea that was floated in the government's National Commission of Audit report would limit the ability of Federal governments to engage in such widespread political tribalism.

Predictably, when the Commission of Audit report was released the government spinners at The Australian started spruiking for many of the ideas contained in the report, with Nick Cater advocating returning income tax to the states.


While the temptation is to engage in such tribalism oneself and immediately dismiss ideas based on who is advancing them, this issue requires a more indepth investigation because returning income tax to the states would be extremely advantageous for those who believe in the role of government.

The basic idea of our Federal system is that a central government cannot obtain the unique local knowledge required to understand and govern disparate regions, with disparate needs and desires. By continually centralising the system Australia has not only homogenised the political culture into its current binary farce, but created a great distance between local understanding and policy creation. It has also created an addiction in the states to socially toxic revenue streams like gambling.

As a taxpayer you should want your tax paid at a more local level. It may seems like lotto odds, but you have a far greater voice within your state's jurisdiction than you do at a federal level. The transferring of income tax powers to Canberra in 1942 created a top-down system of governance that stretched the gap between citizen and government. It created the platform for the arrogant and dismissive government we have today.

Due to essentially having a two party system (two that can form government, that is), and this being present in the states as well as in Canberra, instead of the power-limiting goals of our federation, we have power concentrated within two organisations; the Labor Party, and the Liberal Party.

Because revenue is distributed top-down from Canberra, directives also flow this way. The state branches of the two parties fall in line with Canberra's desires, regardless of their local knowledge (although the current proposed budget may have pushed them too far).

A return of income tax to the states would incentivise the creation of a diversity of state-based parties with a keener ear to local issues to challenge our stale political duopoly. While the nation seemed to have a collective freak-out during the recent minority Labor government, the power-limiting and power-exchanging potential of a greater number of electable parties will restrain the entitled manner with which our political duopoly has operated.


If you are a progressive then you should desire a more decentralised version of government, where it has the chance to be the knowledgeable, responsive, accountable and effective institution you envisage. The impulse for progressives is change, and the temptation for widespread change lies in a centralised, powerful, government that can direct this change. But this has proved to be a highly dangerous practice.

The Left needs to acknowledge that large, centralised governments haven't produced the outcomes they've expected. From the repressive brutality of the 20th Century's Eastern Bloc countries, to the freaky cult state of North Korea, and even the unresponsive, unaccountable Indian state where "the citizen is always wrong".

These governments weren't just born out of bad people with excessive power, they are a result of concentrations of power itself. The fantasy that so long as "nice" people are in power then that power won't be abused is superficial. Misuse of power is structural, when concentrated and distant it occurs regardless of intentions. Decentralisation is a check and balance on the state's inherent impulse for control and authority above the more reserved duties granted to it.

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About the Author

Grant is a freelance writer and political analyst. Combining his background in political philosophy with his current work in the digital industry has given him great insight into evolving human interaction, technical innovation, economic intelligence and migration patterns. He is the proud owner of an Enron glow-in-the-dark yo-yo that he took from the company's London office post-bankruptcy. He is a dedicated fan of the Bangladesh, Afghanistan and Namibian cricket teams. And due to an extraordinary lack of interest from others, he is quite possibly Australia's foremost authority on Canadian politics. He is impossible to inconvenience, extremely helpful in any capacity, and always punctual. He has previously lived in London and Montreal, but currently lives in Melbourne.

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