The latest attempt to ‘end the blame game’ between the state and federal governments over health funding was scuttled after state premiers rejected Prime Minister Malcolm Turnbull’s ‘tax swap’ federalism reform proposal at the April 2016 COAG meeting.  The intransigence of the states —and the Turnbull government’s subsequent abandonment of its White Paper on Reform of the Federation — was indicative of the reluctance of states to take back constitutional power to levy income tax which they had relinquished (but did not abandon) to the federal government during World War II. The rejection of federalism is a paradox: it shows that state governments have yet to understand how their best interests would have been served by levying a state income tax to fund their health services.