Paralympian and disability rights advocate Kurt Fearnley has hit out at the Turnbull government's decision to scrap a $8 billion increase to the Medicare levy designed to fund the National Disability Insurance Scheme, predicting the move would face vocal community opposition.
"We continue to play politics and kick the can down the road. This move will not go quietly," Mr Fearnley said on Thursday morning.
"Love or hate the increasing of the Medicare surcharge – love it or hate it – it gave certainty to the NDIS, it gave certainty that the funding would be there," he told ABC.
While Treasurer Scott Morrison has promised funding for the scheme can now be assured without a tax increase because of the strength of the economy, Mr Fearnley said this commitment "feels a long, long way from certainty".
The reversal on the policy, which was a centrepiece of the 2017 budget and billed as critical to fully fund the NDIS, will help the government focus on personal income tax cuts Mr Morrison is to announce in next month's budget.
“As we prepared the budget, it was clear that we no longer had to do this and so I’m pleased as punch that we don’t,” Mr Morrison told Channel Nine on Thursday morning.
While the government has previously expressed absolute commitment to the disability insurance scheme in the face of attacks by Labor, Mr Morrison said tax revenue was now running $4.8 billion higher than expected.
The proposed increase in the Medicare levy from 2 per cent to 2.5 per cent was projected to raise $8 billion in revenue over two years from its start in July 2019.
"The goal was always to fully fund National Disability Insurance Scheme. That was what was announced in the budget. Now, at this time last year, the situation was quite different and the only we believe we could do that was through that measure," Mr Morrison told 3AW radio.
"You have got drag me kicking and screaming to increase taxes but that was seen as necessary and thankfully it's no longer necessary and we don't need to proceed with it."
Shadow treasurer Chris Bowen has seized on the u-turn, saying the government had accepted Labor's position.
"This was an unfair tax rise which affected every Australian earning more than $21,000. So obviously I welcome that and, more importantly, taxpaying families will welcome that. But if you ask why is this tax rise not proceeding, it's simply because the government could not get the numbers [in] the parliament to pass it because the Labor Party strongly opposed it," Mr Bowen told ABC radio.
According to the estimates of the Australian Tax Office Medicare levy calculator, the withdrawal of the bill will stop a couple earning up to $180,000 a year with two children paying an extra $800 a year in tax in future.
Responding to the government's announcement, Labor has dropped its own proposed Medicare levy hike for Australians earning more than $87,000, which it said was a fairer alternative to the government's policy.
"The government now having dropped the Medicare levy increase, of course, we no longer need to proceed with that effort at compromise," Mr Bowen said.
Mr Morrison said the government was committed to announcing income tax cuts next month.
"We're going to be very responsible about it," he said.
"We remain absolutely on track to get the budget back into balance when we said we would. That's critical. Nothing we are doing is putting that at risk."
The Australian Financial Review reported on Thursday that the cuts would be phased in over a decade.
The Sydney Morning Herald