The Federal Government is reportedly considering an increase to the Medicare levy to fund the budget blowout, which would see the average working family forced to pay an extra $2000 in tax annually.

The suggestion was reportedly made by the Labor states as an alternative to increasing the GST, and would raise $13.8 billion annually, the Daily Telegraph reports .

It is less than half the $35 billion revenue expected to be raised by increasing the GST to 15 percent as proposed by the NSW government.

The National Centre for Social and Economic Modelling was commissioned to cost the proposal and model the impact of a four percent Medicare Levy on the family budget.

Low-income earners would pay as little as $20 extra per year under the plan, with the average family paying $1923 a year.

Those on higher salaries and those paying private health insurance would be hit more than $4000 annually.

The Abbott government has not yet ruled out the Medicare levy plan proposed by the Queensland and Victorian governments at last month's COAG meeting as the best way to fix both the federal and state budget problems. The federal opposition has also not yet ruled it out.

The Medicare levy applies at two percent for people with ­incomes over $20,896.

A doubling of the levy would push Australia's effective top income tax rate to 51 percent, moving it to the top five income tax rates in the world.

How the change would affect you:

Bottom 20 percent of income earners:

Couple with children: -$50

Couple only: -$40

Single parent: -$5

Single person: -$7

Middle 20 percent of income earners:

Couple with children: -$1754

Couple only: -$1065

Single parent: -$350

Single person: -$819

Top 20 percent of income earners:

Couple with children: -$5516

Couple only: -$4044

Single parent: -$3315

Which do you think is the better option for repairing the budget hole? GST increase 3681 Medicare levy increase 2170