Here we go again. Nicola Sturgeon has started talking about raising the top rate of income tax in Scotland to 50%.
She has done this before – and ended up backing away from it every time, because she knows that if you charge people 50% on one side of a border and 45% on the other side of it, they will move. Taxes up. Revenues down.
It is, in this case at least, a given. Still, that doesn’t mean that Sturgeon isn’t having a go at introducing some stealth income-tax rises on those her party think of as the well off.
Consider what Bob Hair of Cazenove calls the “tartan tax trap”. Here, the 40% tax threshold has been frozen at £43,000 (it is now £45,000 in the rest of the UK). That doesn’t sound like a particularly big deal. It is.
This year, it means that anyone earning £50,000 pays £400 more in income tax in Scotland than they do in the rest of the UK. By 2020, assuming the Scottish threshold is frozen and the UK one moves up to £50,000 as planned, those on a £50,000 salary will be paying £1,600 more in income tax.
And to add insult to injury, it is worth noting that a new tax band has been created in Scotland. The National Insurance thresholds are set to work with the UK-wide income tax levels. So you pay 12% up to the 40% threshold and 2% beyond that.
That means that on the difference between the Scottish and UK thresholds the miserable Scottish taxpayer must pay 12% – so an effective tax on income of 52%.
Live in Scotland and want to take home the same amount as money as someone living in England and earning £50,000? By 2020 you’ll need to be earning £52,760, says Hair.
I wonder how long it will take Scotland’s not-particularly-high-earners to notice that living on the Scottish rather than the English side of the border will soon cost them the equivalent of a family holiday in the sun every year.