The Commonwealth was to a large extent a tax-gatherer for the states up to 1910, the Con stitution requiring it for the first 10 years at least to return to the states or to pay on their behalf, as interest or principal on state loans, not less than three-fourths of the total in come from customs and excise. This pro vision was adopted in order to avoid dislocation of the state finances through the transfer of this revenue from the states to the Common wealth, and also to restrain the Common wealth Parliament from mopping up all the revenue from customs and excise by launching out on new and costly enterprises which might leave the states in an awkward financial posi tion. The Commonwealth Parliament as it has set its face sternly against borrowing, even for public works, pays for all that is necessary out of surplus revenue. It is proposed in in fluential circles to federalize the state loans to such an extent as would finally absorb the rev enue now returned year by year to the states, so as to remove the present interdependence of Commonwealth and state finance. The expend iture of the Commonwealth is narrowed down to a very few items. We have the cost of the departments transferred from the states to the Commonwealth and now controlled by it, such as the customs and excise, posts, tele graphs and telephones, military and naval de fenses, etc. To these are added the cost of the Commonwealth machinery of government, in cluding the departments of the governor-gen eral, the ministers of state, and the legisla ture, together with the judiciary. The outlay on public works and buildings for the year 1914 was 12,576,000 and the total expenditure was f 15,458,776.
The revenue and expenditure of all the states forming the Commonwealth for the year ending 30 June 1914 was as follows: Revenue. f47,269,039; expenditure, f46,551,907. Nearly one-half of the total revenue of the state is derived from ((public works?' This represents the earnings of the railways, tramways, harbor works and water works, together with other les ser undertakings, the construction of which has been the main factor in building up what at first sight appears to be the huge debt of Aus tralia. It may, however, be noted that the public works not only aid very greatly in the development of the vast areas of the unoccu pied Crown lands in Australia, but they also produce a large annual revenue, which may well be set off against the annual interest charge, as the value of these permanent assets are set off against the debts themselves. The works include nearly 18,000 miles of rail ways, which cost #177,000,000 up to the end of 1914, the latest year for which the details are obtainable, and for that year they earned, over and above working expenses and upkeep, the sum of £6,887,000 toward interest on the loans raised to pay for them. As the country through which they pass develops their earnings must increase. The item land sales and rents is much lower than in the past years, as the present policy of all the states is to encourage settlement by leasing land on very long leases, with or without right of purchase, so as to assist people with little capital, rather than to sell land for cash. In many cases the purchase money is spread over as many as 20 years, all payments going off the purchase money, so as to aid would-be cultivators who are short of funds to make a start. The provision of such conveniences as roads, bridges and school houses absorb practically all the proceeds from the land for several years after it is first leased, so that the states are by no means living on their capital. The lands which once returned no revenue at all are, by these means, being gradually developed and made to produce load ing for the railways and business for the har bors as well as assets and income taxable by the treasurers. The taxation differs in the several states, though most of them now levy on the estates of deceased persons in propor tion to the size of the bequests left and to the degree of relationship between the testator and the legatee, the larger bequest and the more distant relation paying the higher rate. There are also, in most states, taxes on income and on °unimproved land values° that is to say on the capital value of land less the value of improvements thereon. The principle of pro gression in taxation is recognized in the Com monwealth and the different states, not only in succession duties, hut in income and also in land values taxation. The usual distinction is ob
served between income derived from personal exertion, and therefore dependent upon the life and health of the earner, and that derived from investments or property, which is independent of personal effort. The rate of tax is higher on the income from property than upon the produce of personal exertion. There is, too, the further graduation according to the amount of the income. The land values taxa tion levied in the Commonwealth and in the states is on the value of the land after deduct ing the value of improvements thereon. It is, therefore, much heavier on city and suburban than on country land, area for area. There is also an extra tax of 20 per cent on the first tax if the owner of the land be not resident in the state. The miscellaneous receipts call for no special remark. The total revenue looks very large, but it needs to he remembered that altogether apart from the postal and telegraphic receipts, which appear not in the state, but in the Commonwealth accounts, as do also all figures relating to military and naval defense nearly one-half of the total is for services rendered to the people by means of public works, and altogether outside the functions (ordinary) of government, as commonly under stood. On this account it cannot be said that Australians are burdened by the contributions they make to revenue, even though they pay in all, to Commonwealth and states, f9 to £12 per head per annum. The further taxation levied by local governing bodies for purely local expenditure, such as road maintenance and sanitation, is not large. The figures for Western Australia are abnormal on account of the rapid development of the gold• fields and the resulting preponderance of highly paid adult males in the population, consuming highly dutiable goods. The expenditure of the states would be absurdly high were it not for the fact that it includes, to the extent of 56 per cent of the whole, provision for the working of the railway and the payment of interest and the repayment of debts. These charges are not in any true sense °costs of government.° They must be considered in relation to special income appearing on the other side of the account. That 7 per cent of the expenditure is for education is indicative of the general trend of affairs in Australia and of the high ideals cherished. Of course it needs to be remembered that at the present stage settlement is sparsely spread over a huge territory, and that the costs of administration would be slightly increased, if at all, if there were three or four times the number of people on the land that there are to-day, while the revenue would be largely multiplied. It is area rather than population which, under cer tain circumstances, determines expenditure, and these circumstances exist in many parts of Australia to-day. The Australian of the present is fully determined not to allow extravagance in public expenditure, and no blunder in public life is more speedily punished by the electors. The expenditure of the states of course includes all the cost of legislative machinery, with the salary of the state governors, and the members of the state Parliaments, and also all the charges con nected with the administration of all the de partments, such as police, public health and education, together with the oversight of an elaborate system of local government, and each state in its turn deals with a wide area of purely local concerns. Australia indeed possesses all the concomitants of a highly organized political and social organism, and believes that it gets a full return for its public expenditure. The exceedingly close approxima tion of expenditure to revenue results from a disposition, whenever any considerable surplus appears in the accounts for any year, to devise further public conveniences which may be provided for the future, and so the surplus is absorbed. There is no general desire to show large surpluses nor is there much effort to reduce taxation, which is not felt to be burden some, but rather to add to the facilities afforded for trade, and for the occupation and develop ment of the country and of its industries. These ends are being achieved, and the cost of them is not grudged by those who have to find the money, and who reap the gain.