The avalanche of reviews ordered by the Federal Government has not been shy in recommending changes to how state governments operate. The Henry tax review will be next in the conga line of top-down advice.
The recommendations by Treasury secretary Ken Henry on state revenue reform will be of vital importance to the quality of government in the future. This is because the basic rule of Australian federalism is that who holds the tax rules the roost on policymaking.
On this score, the states are widely viewed to have been consigned to feather-duster status. The Commonwealth has progressively gained extra taxing powers, leaving the states in a mendicant position of relying on federal grants for much of their revenue.
It is in this context of so-called "vertical fiscal imbalance" that Henry will redraw the line on what taxes should be allocated to which level of government.
Will the Rudd Government's top economic adviser recommend that the Commonwealth remains on top of the revenue pecking order, or will he suggest that the feds show fiscal humility by giving some revenue room to the states?
It is difficult to predict the outcome of a closed-door review, but keynote speeches by Henry, and media reports, can serve as some guide.
Twice this year, at least, Henry has spoken of the virtues of greater co-ordination of state taxes.
The idea that the Tax Office manage state tax administration on behalf of the states was viewed as a way to apply broader tax bases, including for payroll tax, and eliminate the alleged evils of interstate tax competition once and for all.
The creation of state tax sub-divisions of the Tax Office would effectively extend the policy influence of the head of the Henry review secretariat.
Others, including major business representative organisations concerned about compliance costs, would also welcome the extinction of tax base competition between the states.
But wholesale state tax harmonisation would restrict opportunities for taxpayers to select a jurisdiction with a more amenable tax structure. In other words, two key virtues of fiscal federalism -- choice and diversity -- would be further diminished in the tax realm.
As explained by Australian National University economist Geoffrey Brennan, any efficiency gains due to broader taxes might also be more than offset by the consequent growth of inefficient government spending.
The idea that tax centralism is desirable has also infused Henry's suggestion that the Commonwealth introduce a profit-based royalty regime in place of royalties levied by the states.
Several specific arguments raised by Henry in March appear spurious. It was suggested that the states are in a weak bargaining position when negotiating with mobile resource developers, leading to greater revenue constraints for jurisdictions.
This scenario would be no less of a reality for the Commonwealth with central resource royalty powers, as developers make decisions about competing projects located in, say, Brazil, Canada or South Africa.
The veracity of the claim that a single Commonwealth royalty regime might be less subject to change, reducing sovereign risk, is undercut by frequent changes already made to existing federal tax streams.
One glimmer of hope is that the Henry review may commend at least a personal income tax-sharing system between the Commonwealth and states.
In general terms, the Commonwealth would reduce its income tax rates, giving room for the states to levy their own rates on top.
While this proposal is a far cry from a much better policy to return all of the personal income tax responsibility to the states, there are some likely benefits from a tax-sharing deal.
If states set their own rates of income tax, up to a certain limit, they would be somewhat more accountable to voters.
For a Henry review sure to contain plenty of advice, it will be intriguing to see if it urges the Commonwealth to step aside and give federalism a fighting chance.
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