Calls to lift the GST rate to placate the states financial challenges will serve to only exacerbate an already severe vertical fiscal imbalance and prolong a deeply unsatisfactory chapter in Australia's Federation. While ever the states are hostage to an extreme reliance on Federal funding, beggar bowl politics will remain the tactic of choice. Unfortunately competition between the states has degenerated into a scramble to divide the Federation's economic spoils rather than its multiplication. The Abbott Government must break this impasse and ensure better mechanics from a renovated Federation that underwrites productive interactions between the two levels of government. Australians have a love-hate relationship with their federation. The promised alchemy of the Federation was good on paper; a young nation that can be greater than the sum of its parts. Instead higher taxes, wasteful administrative duplication, poor value for money for infrastructure and public services are the new norm. The fault line of the Federation is starkly evident with its GST arrangements. A federally-imposed GST rate increase would deliver instant gratification for more dollars to the states but not the much needed autonomy nor the accountability to be responsible for their own fiscal destiny.