Legal Commentary

Following up on my prior post on conditional spending grants, I would like to note a closely analogous experience in another country.  In Australia, which also has a federal constitution with enumerated powers (with unenumerated powers reserved to the states), the states are basically the slaves of the federal government.  The reason is that the federal government has almost plenary control using conditional spending grants.

The neatest trick is that one of the conditions of federal grants in Australia is that the states do not levy an income tax.  In 1942, at the height of the Second World War, the Australian federal government increased the federal income tax by the highest level levied by the states at the time.  The federal government then offered to reimburse states this extra revenue -- on condition that the states do not levy an income tax.  After the High Court of Australia upheld this scheme, all the states capitulated.

To this day, I remain surprised that Congress has not attempted to replicate this trick in the United States.  I'm sure that some pretextual benefit to the general welfare (e.g. to prevent people the paperwork of having to file state taxes) can be conjured up.