Budget now a debt and deficit disaster: PM

Prime Minister Tony Abbott won't confirm the government is backing away from a plan to impose a temporary deficit tax levy.

First it was an emergency, then it was a crisis, now the federal budget is a debt and deficit disaster.

Which means everyone from the top down has to do his or her bit to return some order to the nation's finances, Prime Minister Tony Abbott insists.

But he won't say whether that means a temporary income tax levy or an increase in the marginal tax rate for higher-income earners.

What's more certain is that Mr Abbott's signature paid parental leave scheme is being pared back amid internal coalition and business opposition.

The prime minister on Wednesday confirmed the government's expenditure review committee - also known as the razor gang - had reduced the scheme's salary cap to $100,000 from $150,000.

"I don't want any section of the community to feel they are getting special privileges here," Mr Abbott told reporters in Geelong.

And that means working women earning more than $100,000, even though they still will be eligible for a six-month payment capped at $50,000.

Mr Abbott was less forthcoming about reports the government is looking at increasing the 37 per cent marginal income tax rate to 38 per cent instead of imposing a temporary deficit tax.

"I just want to assure people this is a debt and deficit disaster that this government is grappling with," he said.

"We will fix the problem and do it in ways that are fair."

Mr Abbott said he did not want low-income earners or those who relied on government services to think high income-earners would get off "scot-free" in the budget.

"Everyone has to do his or her bit."

The government is backing away from reports it plans to impose a deficit tax on those earning more than $80,000, after criticism by some of its own MPs.

Instead it appears to be leaning towards increasing marginal tax rates which would have a smaller impact.

For instance, a taxpayer earning $100,000 would pay an additional $200 in tax if the 37 per cent rate was lifted to 38 per cent.

Source AAP

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