TORONTO - Ontario's minority Liberals will survive Tuesday's crucial budget vote and avoid another election after striking a deal with the New Democrats to hike taxes for the wealthy.

Placing a two percentage point surtax on incomes over $500,000 was a key concession to lock in NDP support, even though the Liberals didn't meet all their demands.

The budget still falls short, but the public is better served by the two parties working together than "chasing votes" in an election, said NDP Leader Andrea Horwath.

Even though the New Democrats didn't get everything they wanted, they won't defeat the government in Tuesday's vote and force an election, she said.

"We've done the heavy lifting for Ontarians," Horwath said.

"We didn't walk away, we didn't throw up our hands. We didn't expect that the government would throw out their budget and put in place the NDP platform. I think that's unreasonable."

The deal emerged after Horwath and Premier Dalton McGuinty had a second face-to-face meeting at his office on Monday.

However, all the money raised from the surtax -- which amounts to about $470 million next year -- will go towards paying down Ontario's $15.2-billion deficit. The surtax will also end once the budget is balanced, which the Liberals plan to do in 2017.

The NDP wanted to use the surtax revenue to increase welfare rates, save daycare spaces and put more money into community and home care.

McGuinty agreed last week to allocate more money to child care from the existing education budget and increase the Ontario Disability Support Program by lowering the price the government pays for the top ten generic drugs.

On Monday, the premier also agreed to increase welfare by one per cent instead of freezing rates, which will come from the generic drug savings.

He also promised to use money saved on consultants to create a $20-million transition fund to help rural and northern hospitals.

McGuinty called the surtax a "sensible compromise," but it still flies in the face of his earlier promises not to balance the budget by raising taxes.

"They wanted a tax on the rich, I wanted a way to pay down our deficit faster," he said.

"So we're asking those that can do most to do a little bit more to help us accelerate our plan to eliminate that deficit, so that ultimately we have a stronger economy and we can protect our schools and health care."

According to finance officials, about 23,000 people -- or 0.2 per cent of tax filers -- would pay an average of about $19,000 more in income tax.

The Opposition Conservatives, who vowed to oppose the budget the day it was tabled, were quick to dismiss the surtax, saying it doesn't reduce the size or cost of government or create jobs.

"The choice made by the premier today leads us further down the same failed path we have been on for the last eight years," Tory Leader Tim Hudak said in a statement.

"This is the path of more spending, more taxing and no plan to create a better climate for private-sector jobs. It tinkers with small change when what we need is big change."

The Canadian Taxpayers' Federation denounced the surtax, noting McGuinty also broke a campaign promise not to raise taxes by slapping workers with a health premium within months of becoming premier in 2003.

"This tax grab is not going to lower the deficit, it's going to raise it," Ontario director Gregory Thomas said in a statement. "It is not going to create jobs, it's going to destroy them."

But McGuinty suggested he had little choice in order to stave off another election.

"I accept the status that I have as leader of a minority government," McGuinty said. "And I think the most important orders I received from the people of Ontario is make this government work for them."

McGuinty's decision to increase taxes on the rich came after Horwath dropped one of her key demands -- removing the provincial portion of the HST from home heating bills -- last week.

The NDP also wanted the government to include a $250-million job creation tax credit, scrap plans to sell off Ontario Northland, help industries affected by the budget -- including horse racing and tourism -- and cap pay for executives at the province's agencies, hospitals, universities, colleges and school boards.

The Liberals have agreed to have the tax credit examined by a new jobs and prosperity council that will look at business subsidies and introduce legislation to freeze executive salaries and bonuses for two years.

Horwath said her party will keep pushing for those changes.

It's unclear how the New Democrats will prop up the Liberals. The 17-member caucus could support the government, or simply skip the vote.

Horwath made no promises to support the Liberals on a separate vote on the budget legislation, which could also defeat the government.