Tax

So, we have had the first leaders debate and, to be honest, excepting the unintended light relief provided by David Coburn, I expect even the most hardened of hacks would rather have watched the new series of Line of Duty which was available on the BBC at the same time "except for viewers in Scotland".

All of Scotland's main four Parties are resolutely centrist. Centre left in the shape of Labour, centre right for the Scottish Tories. A wee bit centre left, or maybe just centre in the case of the Lib Dems. As for the SNP, centre left they will protest, centre right we will maintain, and the truth probably lies somewhere in between.

So the differences are marginal and, frankly, some times invented or forced on the Parties by their electoral position.No more so than on fracking. You can bet a pound to a penny that, if Labour was in government and the SNP our main challengers, then "the government" would be keeping its options open while "the opposition", sensing an electoral stick with which to beat them, would be advocating outright opposition.

I'm not persuaded much that any party says will much change opinion over the next six weeks. People like Ruth but she's still a Tory; the Libs are a long long way back; Labour are still in internal disarray and the SNP? Well they'll be not that much different from what a "New Labour" administration would look like except that they'll wave more flags and in some mysterious way "stand up for Scotland". They're not even, at government level, really interested in independence any more. Except as a way to keep their more zoomy members happy. Or at least quiet.

So the idea that an argument about marginal tax rates for 0.3% of the population, 17,000 Additional Rate Income Tax payers earning more than £150,000 in a population of more than five million, is going to prove a decisive one, is, I suspect, an illusory one. If that's actually a view anybody really holds anyway.

Still, we know where Ruth stands. Nobody in Scotland should pay a higher rate of Income Tax at any rate than anybody in England is paying. The Libs, I think, agree with her on the Additional Rate (although not on the Basic Rate. and possibly even then apologies if I've got that wrong). Labour is for putting the Additional Rate up from 45% to 50%.

And then, once again, we come to the SNP.

They agree with Ruth. Not that the Additional Rate should not go up but rather that it should only go up if it also goes up in England. Which, conveniently for them, it isn't going to. Indeed.......I'll come back to the indeed.

Now the "logic" advanced by Nicola for this is that if Additional Rate Tax went up in Scotland in isolation then people would move to England. You might wonder why that would have been any different had we been independent but that's a matter for you. Perhaps then they planned to get Donald Trump to build them a wall. Paid for by Mexico.

But back in the real world where Scotland isn't independent? Actually, and here I might surprise you, Nicola might have a point. Up to a point.

First of all however, let's have a wee look at the figures.

The first thing to accept is that the vast majority of Additional Rate taxpayers would not leave the country for entirely practical reasons.

Earning more than £150,000 doesn't mean you earn a lot more than £150,000. The vast majority of the £17,000 will be in that category. If you earn £200,000 then your net pay after tax and National Insurance is £116,585. £9,715 a month. If the Additional Rate went up to 50% then that net pay would reduce to £114,085. You'd be £208.a month worse off but you'd still have  £9507. to struggle by on. Would you really move house because of that? The price of two decent opera tickets; lunch at a Michelin starred restaurant or half a crate of Brunello di Montalcino? Find another job down south? Expect your spouse to find an equivalently well paid job as well? Relocate your kids; change schools; abandon your friends; find a new golf club; support a new football team?

And that's even assuming you can find such a post. Most of those in the £150,000 to £300,000 band (and I suspect that's all but a few thousand of the 17,000) will be either in the public sector, (or quasi public sector such as consultants, medical and otherwise) or they will be running geographically based SMEs. It's not as easy as you might think to move from running North Lanarkshire Council to running North Yorkshire Council or managing Wilson's pumps in Bathgate to managing Johnston's pipes in Basingstoke. Especially if you, yourself, are the eponymous Wilson in question.

And even then would you save money anyway? If you earn £200K plus you might reasonably expect to live in a house worth £600K plus. The stamp duty alone on such a purchase is more than £20K, never mind other costs, so you'd be eight years before your Income Tax saving even got your Stamp Duty back!

Even look at someone earning £500K paying a 50% rather than a 45% Additional Rate.They'd be losing £1458 a month, not a small sum of money, but still be left with (only) £21506 hitting their bank account on the last Friday of every month. (assuming that's how such people get paid, which somehow I doubt). But their Stamp Duty on their £2,000,000 new house?  £153,750. Nine years to get that back alone.

So Nicola's "It wouldn't bring in any extra money" looks pretty threadbare. Never mind that it leaves the First Minister of Scotland maintaining that large numbers of people would leave her country just to save a few bob, Good luck fighting another referendum with that as a starting premise. Except.

As you look at these figures you do start to realise how much Income Tax is contributed by those on very high earnings. The total current Income Tax paid by someone on £500K per annum is nearly £225K. More every month than many of us earn in a year. The annual Job Seekers Allowance paid to nearly sixty claimants.

And those at the very, very very top, those who earn more than a million pounds per annum? Logically they pay even more.

And this last group, probably no more than a few hundred Scots, if that? They could move. They've probably, indeed almost certainly, already got other houses. And the problem if they move is that the Scottish Exchequer loses not just the marginal tax increase these multi millionaires have avoided but also  the tax they are resigned to paying at existing levels.

But there are two things that might reasonably be done about that.

The first is this. There is no need for the differential to be 5%. That's Labour's figure. But it could be just 1%. Would anybody really move because of that? And even if a few did, could it really be sustained that there would be no net benefit to the Scottish Exchequer? Perhaps that's simply never occurred to Nicola because, as a centrist politician playing a left wing role in pursuit of a flag, she doesn't really believe in increasing tax on higher earners at all? Someone should ask her about it.

The second is more utilitarian and might ultimately be where Scottish Labour policy needs to go. The Smith powers allow the creation of new tax bands. The assumption is that these would be ever higher as you go up the income scale. But in dealing with the super rich you do need to factor in tax competition.So why couldn't there be a band (above £1M?) where the rate reverted to the lower "English Rate"? Indeed why not 1% beneath the English rate? Tax competition works both ways. I can only assume that hasn't occurred to Nicola either.

Because finally I come back to my "indeed" above. It is no secret that George Osborne would like to abolish the Additional Rate altogether so that no-one pays more than 40% Income Tax. By Nicola's argument, that Scottish higher rate taxes must, of necessity, follow English ones, then if and when he does that we'll need to follow suit. And that will take real money out of Scottish public services. Real money.

Nicola's arguments can't prevail. That in the end is a real difference between the political centre left and the political centre. Although I suspect it will never make gripping telly.

Footnote: I am obliged to Iain McWhirter of the Sunday Herald and Mandy Rhodes of Holyrood Magazine for the initial twitter discussion which germinated much of the thinking in this blog.