State governments typically outperform the federal government in service delivery. They are closer to the coalface, more familiar with the intricacies of the terrain. Contrast state and federal service delivery of healthcare and education, for example. States are better able to tailor services to local needs and respond more quickly to feedback.

Conversely, state governments woefully underperform the federal government when it comes to revenue raising. Compare the mess that state governments have made of payroll tax with the efficiency, equity and relative simplicity of the federally administered GST regime.