'Deficit tax' to cost earners on $80,000 an extra $800 a year: reports

People earning more than $80,000 will be in the firing line if the federal government pushes ahead with a national debt tax, according to reports.

News Corp publications on Tuesday reported that the temporary tax, in a strategic leak from the government, would operate like the Medicare levy and cost earners on $80,000 at least $800 a year rising to an extra $8000 a year for those earning $400,000 a year.

It is believed that taxpayers on $80,000 a year will pay an extra 1 per cent and those earning $180,000 a year or more will pay an extra 2 per cent.

Prime Minister Tony Abbott on Monday. Picture: ALEX ELLINGHAUSEN

Prime Minister Tony Abbott on Monday. Picture: ALEX ELLINGHAUSEN

The reports are likely to draw more criticism from Labor, which has warned a “deficit levy” would define Tony Abbott as a Prime Minister if he pursued the new tax and says the government was paying the price for the “deceitful, voodoo economics” of its election campaign.

On Monday, Opposition Leader Bill Shorten attacked the Abbott government, accusing them of reneging on promises made before the election.

"They've doubled the deficit, now because they've doubled the deficit they want all Australians to pay a deceit tax," he told reporters in Brisbane.

The Australian Financial Review also reported on Monday that business and industry leaders were urging the government not to raise taxes to reduce debt.

Australian Chamber of Commerce and Industry chief operating officer John Osborn opposes the idea of a levy to help pay down government debt.

‘‘The government promised no surprises and no new taxes and a debt levy would be an unwelcome surprise,’’ he told ABC Radio on Tuesday.

The Business Council of Australia chief executive Jennifer Westacott told News Corp papers on Tuesday that ''temporary tax increases are no subsitute for reforms that are needed to bring spending back under control''.

But Australian Council of Social Service head Cassandra Goldie supports the levy.

She says Australia is one of the lowest taxing countries in the OECD and needs to strengthen its tax base.

‘‘The levy would need to be done sensibly, it would need to be carefully targeted,’’ Dr Goldie told ABC radioon Tuesday. ‘‘A levy is probably in the right direction.’’

Treasurer Joe Hockey is due to release the Commission of Audit report on Thursday, which is expected to reveal measures to rein in the deficit that is predicted to be $30 billion in the 2017-2018 year.

In a speech to the Sydney Institute on Monday night, Prime Minister Tony Abbott acknowledged that there wouldn't be many people ''without a grumble'' when the government hands down its first budget on May 13, but he also held out prospects of personal tax cuts before the end of the decade.

In the speech Mr Abbott signalled:

-  No changes to the pension during this term of parliament but changes to indexation arrangements and eligibility thresholds in three years’ time.

-  Eligibility thresholds for government assistance could be adjusted with a new income limit of $100,000

-  A winding back of family tax benefits.

-  Indexation and other eligibility thresholds for other social securiy benefits to be adjusted in this budget

''I know that most families are doing it tough, including many families with above average incomes but heavy commitments,'' Mr Abbott said in his speech.

''Not for a second would I label families as “rich” just because they are earning $100,000 a year. A teacher married to a part-time shop assistant with children to feed, clothe and educate is certainly not rich especially paying a capital city mortgage.

''But the best way to help families on $100,000 a year is long-term tax relief and more business and job opportunities, not social security.''

Mr Abbott said no one would be exempt from repaying Labor's spending binge, including members of Parliament.

"The budget pain will be temporary but the economic improvement will be permanent," he said.

Mr Abbott said in his speech that the upcoming budget will not change everything "with one stroke", rather it will be the first instalment in a long-term restructure plan.

Neither will it offer a "spurious guarantee" of a surplus by a particular date but it will put the budget on track for a strong surplus within a decade.

"The changes in this budget will make personal tax cuts much more likely in four or five years' time.

"This budget keeps faith with our election commitments," he said.

He also said school leavers "will be learning or earning" and most families will be doing it tough.

He said Labor didn't just "booby-trap" the budget by making vast open-ended commitments on schools and hospitals to take effect beyond the four-year forward estimates period.

"They created a Ponzi scheme of unsustainable spending because they thought new taxes, more spending and bigger bureaucracies were the answer to every problem."

AAP, with smh.com.au

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