Holyrood control over the levy has been put forward by a devolution commission set up by Scottish Labour leader Johann Lamont and is set out in a paper to be unveiled at the Inverness conference.
However a row has broken out behind the scenes over the plans, with MPs complaining that they were “kept out of the loop” and “not consulted” on the new policy, which was described by one as “barking”.
Several MPs have told Scotland on Sunday that they intend to stay away from the Scottish Labour Party conference, which starts on Friday, so that they do not have to stand by the idea of income tax being completely devolved to Holyrood.
The row is the latest evidence of a growing rift within Scottish Labour between Westminster and Holyrood, with MPs complaining that they are being treated as “the unwanted uncle” when it comes to shaping policy north of the Border.
A paper by the party’s devolution commission was widely distributed but not sent to MPs who only learnt of the proposal on income tax when it was leaked.
One Labour MP said: “I have been asking and asking when are we going to be consulted on this, and we have had nothing.
“Now it looks like the income tax policy has been deliberately put out there by Johann Lamont’s people so there will be no consultation and it will be hard for her to back down from the policy.”
Another MP said: “I won’t go to the conference. I cannot support devolving all income tax to Scotland but if it becomes party policy I will be expected to support it on the day, so it is better not to be there.”
The MP added: “The idea is totally barking. It will be extremely difficult to do. It will have huge consequences and will be taken as a chance by English Tories to reduce the amount of money going to Scotland.
“I don’t think there have been any attempts to discuss this with [shadow chancellor] Ed Balls and the Treasury team.”
Another MP pointed out that any further devolution would need support from the Labour Party in England.
“Johann can’t just say to Ed [Miliband, the Labour leader] this is what I want. These decisions and policies have consequences for the whole of the UK. There are Labour MPs in England now who are getting fed up with it, not just Tories. They are saying ‘you guys just want the benefits of being in the UK but aren’t willing to play your part’.”
The proposal was described by another MP as “an insult to the memories of John Smith and Donald Dewar”.
He added: “Their settlement was supposed to last 100 years, but devolution has hardly got going and we are already ripping it up and starting again.
“Labour MPs in Scotland win more votes than any MSP, general elections for Westminster have a higher turnout than any other elections. Yet when it comes to forming party policy in Scotland MPs are ignored and we are treated as the unwanted uncle at the party.”
There was also criticism of shadow Scottish Secretary Margaret Curran with many of her fellow MPs thinking that she does not make their voice heard enough.
One member of the shadow ministerial team of Scottish MPs said: “Johann and Margaret are old friends who go way back and are very close.
“This is actually a real problem and makes things very difficult for us in terms of getting our views across or challenging what is coming out of the party in Holyrood.”