THE new WA Government has more than a few tough choices ahead of it, in the wake of a debt and deficit crisis facing the State.

To be clear the argument Labor is using — it didn’t know how bad the books really were until it won office — is no more convincing than when the Federal coalition tried to say the same after its 2013 election win.

Tony Abbott sought to curtail excess spending in his first Budget, but in doing so broke promises from the campaign trail not to cut particular areas or raise certain new taxes.

Mark McGowan made similar pledges on the campaign trail, in particular not to raise taxes — beyond a few specific areas he identified. He’s reiterated he’ll stand by that pledge, but if he changes his mind it could be political suicide for the new Premier.

This is the catch-22 McGowan is in.

The budget problems in WA highlight two things: the State’s dependence on mining revenues, notwithstanding continuous talk about diversifying the economy, and secondly the need to look at serious Federation reform.

Federation reform might not be a sexy subject but it goes to the heart of the lack of fiscal independence States suffer from. The Commonwealth collects most of the revenue, the States do most of the spending. Canberra tends to pork barrel the Eastern States when allocating funds, because that’s where the Federal voters mostly are. Given how low WA’s proportion of GST revenue is, courtesy of the broken system for carving up GST revenues, WA gets doubly damaged.

But it doesn’t end there.

WA State governments have long resisted a multitude of indirect taxes which aren’t socially good but at least raise desperate revenue in other States. Taxes on roads (think tolls) and dispersing poker and other gaming machines throughout clubs and pubs.

These sorts of taxes, especially gambling taxes, have a significant social cost, but they are one of the few areas State governments can leverage extra taxation income. In some Eastern States gambling revenue accounts for 15 per cent of total State taxes, which gives you a sense of what WA is giving up.

Don’t get me wrong, the last thing I want to see is addictive poker machines in every corner pub. But with mining royalties down and a broken Federation, not to mention a shafting on the GST carve-up, don’t be surprised if the new Government looks to pokies, or perhaps toll roads.

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One very simple way to make GST allocations fairer would be to reward WA for not chasing the Eastern States down the gambling taxation path.

At the moment WA is disadvantaged for not doing so when the GST calculations are done, because not initiating such taxes is seen as a missed revenue opportunity.

This is clearly a broken calculation method.

Whichever way the new WA Government chooses to jump, economically speaking, there is one indisputable fact — Ben Wyatt has the toughest job in the State. The new Treasurer can’t embrace privatisation to help pay down debt, because Labor opposed the Liberals’ policy to partially sell Western Power.

If he suggests new pokies or toll roads it will be deeply unpopular. If he tries to break promises not to put up taxes, he could come to loggerheads with his leader. If Wyatt does nothing, and debt continues to grow, he’ll wear the blame.

It’s hard to know what he can do, other than push for serious Federation reforms.