“A Large, Extremely Hungry and Undoubtedly Treacherous Hound”: Malcolm Turnbull on State Income Taxes … in 1976

It’s often embarrassing to be right, but I blush not over my correct analysis… it is nothing more than a cunning attempt to offload millions of dollars worth of government expenditure back on to the states without giving them any means – other than posing an income tax – of raising the revenue needed.

[The Premier] claims he was sold a pup. Not so. He has been given a large, extremely hungry and undoubtedly treacherous hound.

No, not a comment about Malcolm Turnbull’s plans to give the states the opportunity to raise revenue to pay for services.

That’s a comment BY Malcolm Turnbull – in 1976 – the last time a Prime Minister tried to devolve revenue raising by means of state based income taxes.

In the July 16-22, 1976, issue of Nation Review, Turnbull went on to write:

The real issue is not whether NSW is going to get a few million more or less in any one year, but the whole purpose and direction of Malcolm Fraser’s economics. Fraser is quite determined to lead Australia down the road of economic recovery by cutting back on government spending …

NSW is taking the brunt of Fraser’s economics. Fraser’s Federalism is just a small part of the strategy …

It’s for this reason [NSW Premier] Wran must stop arguing about percentages here and ten million dollars there. Fraser’s economics is the issue and the sooner Wran takes on the Federal Government the more credible he will sound and the more likely it will be that some general and informed discussion of the grazier’s economics will take place.

In 1976, Turnbull was in the period where he was writing or reporting for the Catholic Church owned 2SM, Nation Review and Channel 9. As he put it felicitously in his account of the Spycatcher trial, The Spycatcher Diaries, he was “serving simultaneously God, Marx and Mammon.”

In serving Marx, or rather, writing as NSW political correspondent for the Nation Review,  the fashionably leftist news review of the day (as Gerard Henderson might put it), Turnbull wrote a number of pieces – in April (before the NSW State Election that saw Neville Wran win power) and in July – on Malcolm Fraser’s “New Federalism”.

“New Federalism” had been one of the central planks of the Coalition’s December 1975 election campaign following the dismissal of the Whitlam Government. In a counter-reaction to Whitlam’s assertive use of Commonwealth grants to the states as a means of developing national approaches to long standing issues of infrastructure and service delivery, Fraser had promised the states a move away from “centralism”.

Central to “New Federalism” was a promise to replace financial assistance grants to the states (which came with terms and conditions imposed by the Commonwealth) by returning a fixed portion of income tax collected by the Commonwealth. The second plank was to enable states to impose their own state-based income tax on top of any imposed by the Commonwealth.

In April 1976, Turnbull had commended the prospect of a state income tax surcharge to Wran as a means – not of increasing revenue – but of replacing indirect taxes, particularly the ones on liquor and tobacco. The progressive nature of an income tax increase being more fair than an increase in indirect taxes on goods which were “inequitable”.

Turnbull finished his July piece by warning that “there is considerably more parochialism in the electorate than in either the Liberal or Labor Parties and if Fraser perseveres … he will earn the criticism of all state leaders.”


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