The Coalition and Labor are staring each other down over the federal government’s $8 billion increase to the Medicare levy.

Key crossbench senators remain sceptical about the government’s plan to increase the Medicare levy from 2019 in order to fund the National Disability Insurance Scheme (NDIS).

That means the government may need Labor’s backing to pass it through Parliament – but the opposition has declared it will only support an increase for people in the top two income tax brackets.

Federal Treasurer Scott Morrison was asked on Sunday whether he would be willing to compromise on the increase to get it through Parliament, and made it clear the government would not engage in horse-trading.

“No, it’s a fair measure … we’ve already come to the middle on this,” Mr Morrison said.

“We didn’t want to put an increase on the levy, we wanted to be able to do it through savings. And the Senate in their decision decided to reject that.

“We’re standing on the middle on this, and we’d invite other members who want to be responsible … to give people with disabilities and their families the certainty that their funding is there. We can agree on that, surely.”

ALP standing firm

But Opposition Leader Bill Shorten said Labor would not budge on its stance.

“We’ve made clear our position and we hope the government sees sense,” he said.

Labor continues to insist that the Coalition should instead abandon its planned corporate tax cuts, and extend a temporary deficit levy on high-income earners, which is due to expire this year.

“This is a government who is making sure millionaires pay less from July and that 10 million ordinary Australians pay higher income tax,” Mr Shorten said.

“The government doesn’t need to increase the tax burden on 10 million Australians – instead they can not go ahead on a $65 billion corporate tax cut.”

Mr Shorten’s plan to extend the deficit levy means Labor is entrenching a top tax rate of 49.5 per cent for those earning more than $180,000 a year.

Keating weighs in

Former Labor prime minister Paul Keating has criticised the opposition’s tax policy, telling the Australian Financial Review their top tax rate was “too punitive”.

Mr Morrison also said it was manifestly unfair to business owners who worked hard and enjoyed success.

“If you are saying to them the great advantage when they really start to hit their straps is that you have to work one day for the government and one day for yourself on every extra dollar you earn [over $180,000] then that’s not a fair Australia. That’s not fair to anyone,” Mr Morrison said.

Mr Shorten again said he would like to reduce tax rates for all Australians “eventually” – but did not say when.

“Lowering all the marginal tax rates is something that I would like to do eventually. But I need to renew the deficit levy so that we can actually do budget repair that is fair,” he said.

“This government is not trying hard enough to look after all Australians. This is a budget where millionaires pay less, multinationals pay less, and 10 million Australians will pay more.”

The Opposition Leader said earlier last week the deficit levy for high-income earners could be abolished after the budget reaches surplus.

-ABC