A Taxing Day
Posted on March 24th, 2016
By Rab Bruce’s Spider
So we’ve heard the SNP’s plans for Income Tax and Labour’s plans for scrapping the Council Tax. Of the two, it must be said Labour’s is the more radical as the SNP demonstrate, once again, that they are not nearly as Left Wing as the media would have you believe.
That media has, of course, been quick to decry the SNP as very bad indeed, castigating them for punishing high earners by not passing on the UK Chancellor’s proposed increase in the higher rate tax threshold while simultaneously wailing that they have not imposed a 50p top rate to get more money out of those high earners. Do you ever get the feeling you just can’t win?
I can understand why the SNP have declined to introduce a 50p tax rate in Scotland when the rest of the UK does not have one, especially since their research suggests that it would only take around 1,000 of the 18,000 or so high rate taxpayers to quit Scotland for the policy to be rendered pointless.
But does taxation cause people to move? Across the world, different countries have different levels of taxation but it does not generally cause mass migration. For example, Poland has much lower rates of tax than the UK but the general movement of population is from Poland to the UK, not the other way around. This is because people move for work. We in Scotland should know this since too many of our young people move to London in search of work in spite of the much higher cost of living there due to high property and rental prices.
On the other hand, Scots tend to pay more for things like fuel and groceries due to higher transportation costs but, again, this hidden cost does not generally cause people to up sticks and move.
In broad terms, then, people move in order to find work, not to escape taxes, so perhaps tax rates are not the driver that the media tell us they are.
There is, however, a major caveat to this. The problem is that wealthy people on high incomes are more likely to move jobs and, all other things being equal, an increase in their tax burden might just persuade many of them to move. This decision will be made easier because relocating from Scotland to England or Wales is much less of an upheaval than moving to, say, Poland.
But it isn’t as simple as that. Would these individuals give up their high pay jobs when they move? If so, somebody else would presumably need to replace them and therefore the tax would be paid, just by a different person. The alternative is that the original jobholder remains in post but commutes from England, thus probably paying more in travel costs than they are saving in tax. That doesn’t seem logical, does it, especially for people for whom money is the principal motivating factor?
The problem is that we won’t know what would actually happen unless we introduce a top rate of 50p. So the SNP have stuck to the cautious centre ground, with just a little tinkering which won’t really affect that many people and means that most will continue to pay the same amount of taxation they have been paying so far.
As for Labour’s Council Tax replacement, that sounds grandiose but actually it’s just a simplification of the existing system since it is based on property values, just like the Council Tax, so it’s not all that radical. In principle, it sounds reasonable, even though it will mean the so-called “Squeezed middle" Labour are always on about paying a lot more than they do at the moment.
My main issue with the proposal is that it takes no account of regional property values. So, for example, someone in a small flat in Edinburgh or Aberdeen, where prices are high, could be paying the same amount as someone living in a three-bedroom detached house in a rural area, or a semi in a town outside theCentral Belt.
Others have gone into the plan in some detail and pointed out its other flaws but, of course, the most important thing to remember about Labour’s proposal is that it doesn’t matter because they haven’t got a hope of being in a position to implement it, even if it had no flaws.
Of course, the problem with taxation is that, whatever system you put in place, someone will be worse off and you can bet the media will be able to track that person down so that they can proclaim the unfairness to the world. (Or, at least, to Scotland).
There is no such thing as a perfect taxation system but we need to get away from this notion that tax is a bad thing. It is essential to the running of the public services we all demand and, quite frankly, those who can afford to pay a bit more should be compelled to do so in order that the burden can be relieved on those who are currently penalised by all sorts of taxation. Not only that, our culture needs a major shift so that those who pay more in tax because they can afford to do so, should take pride in the fact that they are contributing to the overall wellbeing of the country. That’s a long way off but it’s an aspiration to aim for and really should occupy our minds more than simply bickering over tax rates and structures.