Income tax: Humza Yousaf should be wary about calls to add to the burden of the better-off – Scotsman comment

People in Scotland who earn £50,000 already pay £1,552 a year more in income tax than those on the same wage in the rest of the UK

As Humza Yousaf ponders how to pay for the laundry list of spending pledges he announced at the SNP conference – from a council tax freeze to an extra £300 million for the NHS – he is facing calls from the Scottish Trades Union Congress to increase taxes on the better off. While it may be tempting, there are reasons why the First Minister, and indeed the rest of us, should be wary.

Scotland’s tax regime is already substantially different to the rates applied elsewhere in the UK. While those earning less than £27,850 are slightly better off than people south of the Border, someone earning £50,000 pays a whopping £1,552 a year more.

Adding to that extra burden could have damaging consequences in terms of revenue: increasing the pressure on people to rearrange their financial affairs to legally reduce the bill; providing a greater incentive to look for a similar job in England; and discouraging high-flyers thinking of relocating to Scotland who could have an impact on the economy beyond the extra tax revenue they bring. It would also increase the impression among higher earners, who already pay relatively more than others, that they are being treated unfairly.

The Scotsman understands that the government is moving away from the idea of increasing taxes on those earning under £50,000 at the next budget. This tacitly suggests those on more than that should prepare for some bad news. One problem is that Scotland does not have a vast number of people on particularly high wages. About 500,000 people pay the 42 per cent tax rate on income between £43,663 and £125,140, while just 33,000 pay the top rate of 47 per cent on income of more than £125,140.

Taxation is necessary to fund decent public services. But the rates set by the government need to be fair to all and reflect economic reality. A concern about the current SNP administration is that too much public money is wasted on mismanaged public services and projects. Many people are happy, indeed proud, to pay tax, but Yousaf should remember that all are concerned to see their money is well spent.