To what extent did the early political success of the Australian Labor Party (ALP) impact on public policy? This article presents an analysis of patterns of social expenditure and taxation in the Australian states from 1911 to 1940. Although the 1910 Surplus Revenue Act initiated a major shift in financial power to the Commonwealth the states continued to levy income tax, operate social services, in particular health and education and provided direct social welfare payments in this period. The focus of scholars on the institutions of tariff protection and industrial arbitration has obscured the importance of state social services expenditure. The article reviews general theories of public expenditure as well as relevant Australian scholarship. It then examines patterns of taxation and social expenditure and considers the extent to which state divergences were influenced by the partisan composition of state governments and divergent labour movement strategies. It concludes that Labor made a difference but this difference varied from state to state.