Malcolm Turnbull says states should levy own income tax levels | afr.com
I can't see that the public is going to warm to the idea of varying levels of tax from State to State. For one thing, it's easy for either side of politics to attack it, and hence Abbott has been against such ideas in the past, using the same arguments as Neville Wran, apparently*. (Immediate reaction at Conservatives Who Think Sinclair Davidson is Nuts [Catallaxy] is also negative.)
Oh look - I've found something useful at the IPA website about the history of this sort of proposal.
It's also a good sign that it should be rejected: if the IPA is for something, it's a very safe rule of thumb that it's a bad idea.
* see link following.