Labor will back government plans to raise the Medicare levy by half a per cent, raising billions in revenue for the National Disability Insurance Scheme - but only for people in the top two tax brackets.
The decision to back a rise in the levy for people earning more than $87,000, announced by Opposition Leader Bill Shorten in his budget reply on Thursday night, sets up a political fight between the opposition and the government, which announced an across-the-board rise in Tuesday's budget.
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Bill Shorten sticks with Labor's traditional strengths as he responds to the federal budget.
The proposed Medicare levy change means people in the top tax bracket would face a 49.5 per cent tax rate, versus 47.5 per cent under the Coalition.Â
And Mr Shorten committed Labor to spending an extra $22 billion more than the government on school funding, two weeks after the government promised to pump $19 billion extra into schools over the next decade under the so-called Gonski 2.0 deal.
![Opposition Leader Bill Shorten delivers his budget reply speech on Thursday night.](/web/20170513011834im_/http://www.theage.com.au/content/dam/images/g/w/3/1/b/r/image.related.articleLeadwide.620x349.gw26hj.png/1494598969969.jpg)
All up, Mr Shorten claimed Malcolm Turnbull's government was ignoring $128.5 billion in savings and revenue measures over a decade - comprising letting the deficit levy expire (19.4 billion), not cutting negative gearing and capital gains tax concessions ($37 billion), spending $65.4 billion on company tax cuts and more - that could be used paying down debt.
On the government's plan to hit the big five banks with a $6.2 billion tax, Mr Shorten said Labor was concerned the impost could hit "every Australian with a bank account or a mortgage".
"If the banks pass on a single dollar of this tax to Australian families - then that should be the end of this Treasurer, this Prime Minister and this government."
Labor has savaged the Coalition for planning to spend $22 billion less over 10 years, but the package has been mostly welcomed by the education sector - with the exception of Catholic schools.
![Opposition Leader Bill Shorten and his frontbench react to Treasurer Scott Morrison and Prime Minister Malcolm Turnbull ...](/web/20170513011834im_/http://www.theage.com.au/content/dam/images/g/w/2/m/u/t/image.related.articleLeadwide.620x349.gw26hj.png/1494562734966.jpg)
The promise by Mr Shorten will allow Labor to argue it is the party that will best fund education.
Mr Shorten also made a new promise of a $3000 limit on how much people can deduct for managing their tax affairs, in a crackdown that will raise $1.8 billion over a decade.
![Senator Mathias Cormann.](/web/20170513011834im_/http://www.theage.com.au/content/dam/images/g/w/2/b/e/j/image.related.articleLeadwide.620x349.gw26hj.png/1494562734966.jpg)
But it is the decision to back the rise in the Medicare levy for people in the top two tax brackets, combined with Labor's decision to keep the budget repair levy, which underscores the federal opposition's determination to win the political argument about budget fairness.
The tax rises will be used to frame the Coalition as more concerned about millionaires than the middle class.
![Opposition Leader Bill Shorten during question time on Thursday.](/web/20170513011834im_/http://www.theage.com.au/content/dam/images/g/w/2/s/u/q/image.related.articleLeadwide.620x349.gw26hj.png/1494566717410.jpg)
Under the government's plan the Medicare levy would rise by half a per cent and raise $7.8 billion over two years from July 2019, and would kick it in at the much lower rates of $21,655 for singles and $36,541 plus $3356 for each dependent child for families.
" The Liberals' new income tax increase will affect every Australian right down to an income of $21,000. A worker on $55,000 will pay $275 a year. For someone on $80,000, it's an extra $400," he said.
![Illustration: Ron Tandberg](/web/20170513011834im_/http://www.theage.com.au/content/dam/images/g/w/2/z/0/f/image.related.articleLeadNarrow.300x0.gw26hj.png/1494562734966.jpg)
Labor argues that by keeping the deficit levy and raising the Medicare levy to 2.5 per cent for people earning over $87,001, it would generate $4.45 billion more revenue than the Coalition's plan over 10 years.
" Our plan will deliver more revenue than the government over the medium term. Without putting the burden on to families earning modest incomes," he said.
" Labor will not support spending $19.4 billion [by allowing the deficit levy to expire on July 1] on the wealthiest 2 per cent of Australians."
Mr Shorten made a series of other announcements in the speech, including a promise to block the government's first home super savers scheme, cuts to universities and student fee increases, a re-heated pledge to close multinational tax loopholes and save $5.4 billion, a promise to reverse TAFE cuts to apprenticeships and identified about $1 billion in new savings.
The change to the rules about tax deductions would mean that taxpayers cannot deduct more than $3000 in payments to lawyers or tax accountants for managing their tax affairs.
Labor argues the NDIS was fully funded when it was in government but the government argues there is a $56 billion shortfall in funding over 10Â years.
Finance Minister Mathias Cormann said on Thursday the government was proposing a "fair, responsible and proportionate increase to the Medicare levy in order to fully fund the National Disability Insurance Scheme."
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