The federal government is coming under sustained pressure from startups and small businesses over its decision to remove the 50 per cent discount on capital gains tax and replace it with an inflation-adjusted scheme.
Mr Keating, who introduced capital gains tax as treasurer, said the campaign against the changes amounted to "howls for continuing preference".
"A couple of smarties, John Howard and Peter Costello, thought they could do their used-car selling and dodgy accounting mates a favour by jacking a 50 per cent discount onto the taxation of capital profits," the Labor elder statesman said in a statement.
"Yet wealthy people are out there now arguing against the government's change, notwithstanding the stark evidence of the price shock Howard and Costello induced.
"Punters with a big idea won't be put off by some marginal change to the tax rate.Â
"The rush of entrepreneurial blood to the brain always dominates."
But a group of 10 women who have founded public relations, sign printing, arts studio, event management and skin care businesses have blasted the tax reforms and Mr Keating's support of them.
"(Mr Keating's) characterisation is dismissive and out of touch with the reality of modern Australian business ownership," they said in a joint statement.
Led by public relations founder Genevieve Taubman, the group argues the changes would affect existing businesses and potentially discourage women from starting businesses in the future.
"It is already harder for women to access capital, secure loans, raise investment, and attract senior talent," they said.
"Many female founders begin with fewer resources, smaller networks, and more family responsibilities than their male counterparts. The proposed CGT changes would make an already difficult path even harder.
"We are not political operatives. We are not tax avoiders. We are women who had an idea, took a risk, and worked incredibly hard to build businesses - often while raising families at the same time."
In a morning radio interview, Prime Minister Anthony Albanese turned to a sporting metaphor to defend the government's broken promises not to change negative gearing and capital gains tax settings.
"You've got to change your position sometimes in a footy game if things aren't working," he told KIIS Brisbane.
He also backed changes to negative gearing that would limit the measure to new properties only from July 2027.
The prime minister dismissed concerns scrapping negative gearing could lead to increased rents and stagnant house prices, as happened in New Zealand when the measure was abolished.
Negative gearing has since been re-introduced across the ditch.
"We're throwing absolutely everything at this because I don't want for the generation who are listening to this program and the ones to come to be the first generation that basically give up on housing," Mr Albanese said.
"What we're doing here is, this is just one measure in a whole range of comprehensive measures."
Nationals senator Bridget McKenzie said the defence from Mr Keating showed the budget sell to the public had gone badly.
"You know something's wrong when you have to wheel out Paul Keating to stick up for your budget," she told Nine's Today program.
"A lot's changed, Mr Keating, in the quarter of a century since you were in charge of the Treasury.
"What you're seeing with the reaction of this budget is everyday Australians who are working so hard to get ahead, feel like (Treasurer Jim) Chalmers is coming after them."
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