'Shall Become Exclusive': An Economic Analysis of Section 90.

Section 90 of the Australian Constitution gave the power to impose excise duties exclusively to the commonwealth. Sometimes it is argued that the founders were motivated by a concern to ensure free interstate trade. The authors show that Section 90 may have reduced interstate trade distortions but equally it may have increased them and created a large excise revenue surplus for the commonwealth. There is, therefore, a case for giving excise tax powers back to the states and allowing them to cooperate through an interstate compact. There may be a role for the commonwealth in monitoring and enforcing such a compact. Copyright 1994 by The Economic Society of Australia.