FEDERALISM: A NEW PHASE
THE post-war period has seen important developments in federal-state relations in all three federations. Some of these developments are new, such as the Tax Rental Agreements in Canada, the Uniform Tax Plan in Australia, and the institution of variable grants in the United States. Others are merely extensions of earlier institutions and tendencies. They have come about partly as a consequence of the war itself, partly because the high costs of defence in a period of continuing international tension have put a heavy financial burden on the national governments, and partly because of the increased demand for social and economic security. Put together, they may mean that federalism in these countries has entered a new phase, and it is worth while taking stock of the position. There are at least four developments that should be noted.
In the first place, the taxation of incomes is now virtually monopolized by the federal government in all three countries. This monopoly is not quite complete: in Canada the province of Quebec has not yet agreed to enter into a Tax Rental Agreement; in the United States the state governments are free to tax incomes, though their total revenues from this source amount to only about 5 per cent. of federal income tax revenues; and in Australia the Uniform Tax plan is the subject of a good deal of political controversy. But, substantially, income tax is now a federal source of revenue.
Second, the state governments are considerably more dependent upon federal payments than they were before the war. The Australian states, on average, now derive about 60 per cent. of their general revenue from federal sources, and for the Canadian provinces, apart from Quebec, the figure is about 30 per cent. If their accounting systems allowed for the inclusion of specific grants in general revenue, the proportions