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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
