Newman rallies states on income tax reform

Campbell Newman wants the federal government to return part of the income tax paid by Australians. Source: AAP

THE Abbott government will "hang" the states and territories unless they demand a slice of income tax to cope with budget cuts, the Queensland premier says.

Campbell Newman says the federal government must return a chunk of the income tax paid by Australians to state and territory governments so they can properly fund schools and hospitals.

He says states and territories are more than happy to assume full responsibility for those services, but must be given the means to fund them.

He'll make the case for his tax plan on Sunday, when premiers and first ministers will meet in Sydney over the federal budget's $80 billion cut to health and education funding.

Mr Newman said he floated the plan with Prime Minister Tony Abbott on Thursday, but Mr Abbott was "non-committal". But the Queensland premier says he has early support from some of his counterparts, although he won't say who.

"If the states and territories don't hang together on Sunday they will be hung separately by this federal government," he told reporters on Friday.

"The prime minister has said that we should go on and run schools and hospitals. We're very happy to do that - I certainly am - but we need the revenue coming directly."

The premier stressed he wasn't arguing for an increase in taxes but rather for a certain percentage of taxpayers' money - for example 10 to 20 cents in the dollar - to go directly to the states without federal interference.

"Queensland mums and dads pay their fair share of tax. They deserve a fair share of that funding coming back directly to Queensland so we can run hospitals and schools," Mr Newman said.

He again ruled out endorsing an increase to the GST, saying he wasn't playing the federal government's "game".

"If the prime minister and treasurer expect this state to go and ask for an increase in the GST he's mistaken. We're not going to do that," he said.

Mr Newman said his tax plan would end fighting between federal and state governments and Australians wanted that.

"They want politicians to work this out, to sort out the federation, to make the country work better and I assure people that's what I'm about."

Mr Abbott said he was happy the premiers were thinking about proposals they could put to the federal government, particularly on tax reform and improving the federation.

"What I'm on about is lower, simpler, fairer taxes and I'm on about a federation that works better," he said.

"I'm not interested in picking fights - I'm interested in finding pathways forward."

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