The prime minister says defeat of his income tax plan is a wake-up call for state premiers to start living within their means.

Malcolm Turnbull was forced to withdraw the proposal just two days after hailing it as one of the greatest reforms in generations after it was rejected by leaders at Friday’s Council of Australian Governments meeting.

Now that the states had refused an opportunity to raise income taxes to pay for services like hospitals and schools, they could not credibly ask the federal government to do it for them.

“What that means is we must now live within our means,” he told reporters in Sydney on Saturday. “It is a wake-up call for the state governments.”

Labor has laughed off the proposal’s defeat as a humiliating farce.

The opposition frontbencher Jason Clare said he’d had hangovers that lasted longer than Turnbull’s policy.

“I think Britney Spears’ first marriage lasted longer than this policy.”

The health minister, Sussan Ley, has slammed the state premiers, denying the proposal’s defeat was an embarrassment.

“They’re quick to ask the commonwealth to do their dirty work,” she said.

“We should never make an apology for having big ideas and the courage to make a difference.”

Friday’s meeting ended with state and territory leaders accepting an extra $2.9 billion for their hospitals to 2020.

Turnbull on Saturday said the states had repeatedly asked him to raise more money for them via federal government taxes but rejected the opportunity to step up and raise their own money.



“[The states] cannot any longer credibly ask the federal government to raise taxes for them to spend if they were not prepared to raise those taxes themselves.”



Opposition leader Bill Shorten said Turnbull’s crazy idea of double taxation had been a “humiliating farce”.

“He doesn’t even have the courage of his convictions.”

