The PM's latest 'Big Idea' may have died, but the problem of paying for our public schools and hospitals is still very much alive.
Last Wednesday, the Prime Minister announced the biggest shake-up of Australia's federal funding system in decades. But by Friday, Malcolm Turnbull's proposal to give the states income tax powers and have the Commonwealth withdraw from public school funding had been dumped after resistance from the premiers and claims of "double taxation" by the opposition.
According to Turnbull, his proposal is now dead and not going to return. In its place is $2.9 billion to offset the $57 billion cut from federal funding for hospitals during the next decade, and no movement on the $23 billion that is to be cut from education. 
Some political pundits described it as a "humiliating backdown". Others speculated that the Big Idea was perhaps all just a ploy to distract attention from federal funding cuts. Either way, it made for depressing viewing for anyone who cares about quality education for the 3.5 million children in Australia's schools or about the stretched-to-breaking-point hospitals that every single one of us relies upon.
COAG (the Council of Australian Governments) is meant to be the top table of decision-making in this country. But after its 42nd meeting on Friday, we are still no closer to a serious proposal for sustainable funding for our health and education systems.
To be sure, Turnbull mishandled the exercise, having done none of the background work required to give his revolutionary proposal a chance. Prime minister John Howard and treasurer Peter Costello spent two years arguing the case for the GST. Turnbull and Treasurer Scott Morrison spent just two days arguing for their latest reform proposal before it was dumped.
But unfortunately, the problem goes much deeper than the PM's maladroit handling of the debate. It is just the latest example of how the institutions that govern Australia's federal system have become dysfunctional.
At the core of the problem is the extreme mismatch between revenue-raising and service-delivery responsibilities. The Commonwealth controls Australia's major taxes and raises 80 per cent of all government revenue. But the states have constitutional responsibility for many of the main areas of expenditure, such as health, education, community safety, roads and other infrastructure.
This disconnect leaves the states financially dependent on central government and violates the most basic principles of good management practice based on accountability and transparency - and it is an imbalance that is more severe in Australia than in any other federation including the United States, Germany or Canada.
This leads inexorably to the "policy meddle", where the federal government puts unacceptable political conditions on payments to the states. Or it creates the "fiscal squeeze", where the Commonwealth cuts funding to the states below an adequate level so it can give priority to its own political objectives such as income tax cuts or a lift in defence expenditure.
Turnbull's "Big Idea" for reform of Commonwealth-State financial relations was actually the beginning of a "Good Idea". His proposal would have given the states some power over income tax and the ability to levy their own rate. It was an idea that was supported in the National Audit Committee Report in 2014 and the Henry Tax Review in 2010. It would improve accountability in the way taxation revenue is raised and spent in the federation. It would also enhance the capacity of the states to meet the costs of health care and education, which are growing faster than the broader economy.
Conservative commentators may be in ideological denial, but it is a question of basic maths: government in Australia needs to increase its tax take to maintain the basic public services people depend on. Even the business-backed think tank CEDA released a report last week finding tax increases have a bigger role to play than spending cuts in achieving budget repair.
Increasing income tax is one measure that does not seem to create mass public hysteria, at least compared to, say, the GST. The Gillard government introduced an 0.5 percentage-point increase in the Medicare levy in 2013 to fund the National Disability Insurance Scheme, and the Abbott government introduced the deficit levy of 2 per cent on individuals on incomes over $180,000 in 2014. Both changes received bipartisan support.
Unfortunately for the states, history would suggest the attempt to give income tax powers back to the states was always going to be problematic. Prime minister Robert Menzies toyed with it in 1952, Billy McMahon in 1971, Malcolm Fraser in 1977 and Bob Hawke in 1991. On every occasion it ran into political trouble.
So for now, the tax reform process limps on, with COAG leaders agreeing to investigate the Commonwealth sharing income tax revenue with the states, although without the states having autonomy to set their own rate. For the states, it is time to start the process of bravely looking at their existing tax base, and what they can do to raise more revenue themselves.
The states have a woeful record in running down relatively efficient taxes. Payroll tax, a form of income tax, was given to the states by the Commonwealth in 1971. The states have eroded their payroll tax systems through exemptions for political constituencies and rent seekers. Death duties are an efficient tax but were abolished by all the states in the 1970s.
A more promising proposal is for the states to follow the ACT's lead and replace inefficient state stamp duties with a more efficient land tax. The final interesting case study is what the Andrews government ends up doing in response to the family violence royal commission. The need for new policy action is evident, but the funding model is less clear.
Daniel Andrews has not ruled out a new levy. Given other states are likely to follow Victoria's lead in this area, it is a decision that has social and fiscal policy implications at a national level.