According to Thomas Edison "genius is 1 per cent inspiration and 99 per cent perspiration". What Edison said about genius also applies to political success. Last week Malcolm Turnbull tried to invert Edison's dictum while standing in the car park of the Penrith Panthers rugby league in western Sydney.
There was nothing wrong with Turnbull's policy. A change of the kind he proposed would impose fiscal responsibility on state governments and strengthen their democratic accountability. Which is why I have long argued for such a measure. On my list of 75 Radical Ideas to transform Australia published in 2012, returning taxing powers to the states came in at number seven. It could be argued that it's not even that radical an idea. Tony Abbott's National Commission of Audit suggested it, and it was discussed in detail in an issues paper last year out of the federal government's federalism reform process.
State premiers might not have been told of the day and time of Turnbull's announcement, but for some of them to pretend they knew nothing about the concept of state income taxes reveals either that they're not telling the truth or that they're even less informed about public policy than they appear.
A reform of the kind the PM outlined requires a lot of perspiration. Especially because state premiers are so resistant to reform and just so recalcitrant when it comes taking responsibility for raising the money they spend. So you'd be expect there to be a Plan B, Plan C, and Plan D following what was always going to the inevitable rejection of the plan from the premiers. There still might be a Plan B, but we're yet to see it.
Allowing state governments to levy income tax is a good idea. Raising the GST, restricting negative gearing, and increasing taxes on superannuation are all bad ideas. State income taxes can eventually lead to lower taxes. Those other policies the federal government has flirted with have only one objective, namely to get more revenue.
A state income tax actually makes it harder for governments to increase taxes. At the moment when the federal government increases income taxes, as the Abbott government did with it's ill-conceived "deficit levy", every Australian taxpayer is affected. A tax increase is the decision of one government. If states imposed income taxes, a tax increase that impacted on every taxpayer in the country would have to be the result of a decision by each of the six state governments. Only one government currently has the power to cut income tax — but if state governments had that power, any one of six jurisdictions could cut income tax.
TEN YEARS OF PERSPIRATION
The country's last major tax reform, the GST, took almost 10 years of perspiration to get implemented, from when it was first suggested by the Coalition in 1991 to when the legislation passed in June 1999.
Paul Keating likes to imagine that it was his genius and a flourish of his fountain pen that floated the dollar. In fact deregulation of the exchange rate had been debated for decades.
As worthwhile a reform as giving state the power to levy income taxes is, it is not the single biggest issue facing Australia right now — and it's not what Turnbull should be spending the election campaign talking about.
The Turnbull government wasted its first six months contemplating the follies like raising the GST. It now has just a few months before the federal election to reorient the public debate.
One of the challenges for the federal Coalition is to pick a policy and then stick to it for more than five minutes.
But at the moment has an even bigger challenge. It has to find a way to spend less time talking about how to raise taxes. Instead it should spend more time talking about how to cut government spending. If any cause requires perspiration it's that one.
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