The latest “big idea” on tax policy from the Coalition government is to grant independent income tax powers to the states. This would be accompanied by a devolution of funding responsibility for big-ticket services like health care, hospitals, and schools. Prime Minister Turnbull argues that forcing state governments to raise the money they spend will
Was it really the Treasury’s economic modeling that convinced Prime Minister Turnbull to abandon his plan to raise the GST and cut income taxes? Treasury simulations indicated the trade-off would have no significant impact on growth. Or perhaps it was another kind of calculation – electoral – that convinced the Coalition to drop the idea, and the economic numbers just provided political cover.