FALLING FLAT: Opposition leader Tony Abbott has spruiked a 35% flat rate tax for middle income earners.

MIDDLE income earners would be slugged with a higher tax bill under Tony Abbott's favoured tax regime.

The Opposition Leader, who also declared welfare reform one of the nation's top priorities, last night used a Melbourne speech to ramp up his support for a flat tax rate for those earning between $25,000 and $180,000.

Mr Abbott said Australia was in desperate need of a tax debate and reiterated his election campaign support for the flat 35 per cent rate.

''The most attractive of the Henry recommendations was to increase the tax-free threshold to $25,000 and to have a flat rate from that point to an income of $180,000 a year,'' Mr Abbott said.

However, in a blow to his bid for a fairer tax system, Treasury documents released last night reveal the flat rate would leave millions of middle income earners with a bigger tax bill and cost the Government billions.



''The proposed tax scales are estimated to lead to an income year cost of around $3 billion per annum, despite an increase in net tax liability for the majority of individuals with taxable incomes of between around $35,500 and $94,000,'' it said.

The Henry review modelling, released following an Opposition campaign, said the nation's wealthiest would get ''significant'' tax cuts along with the lowest paid earning less than $30,000.

Despite endorsing the plan in his review, Treasury boss Ken Henry has since said the Budget cannot afford to implement the changes, which would cost an estimated $3 billion a year.

In the election brief prepared for a potential Coalition government, Dr Henry said the plan ''may not be possible in the short term given tight fiscal circumstances''.

Mr Abbott also used the Melbourne lecture to return fire on Prime Minister Julia Gillard after her taunts that Opposition figures were anti-reformist ''economic Hansonites''.

''The Rudd/Gillard Government oscillates between declaring its economic conservatism and attacking three decades of alleged neo-liberalism,'' he said.

Welfare reforms, one of the key themes of his book Battlelines, were a sure way to a more productive society.

''Broadly considered, it's the most important immediate reform task facing the Commonwealth Government,'' he said.

The Coalition's policies to return welfare recipients to work, including relocation allowances for people off work for more than 12 months, remained key to its platform.

The majority of disability pensioners had muscular skeletal problems or mental health issues, but not all disabilities were an ''insuperable bar to work''.

Mr Abbott said welfare reform was not about ''kicking a million disability pensioners''.

''It's an argument against paying them a benefit and then largely ignoring them when they are capable of more.''