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RISE - The "Scottish Syriza"

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Is Holyrood's current income tax power (or powers potentially available) to change each rate by up to 3% or just the base rate?

It's a fair argument that the personal allowance means any raise in income tax is redistributive but in reality, with a fairly low allowance, it's arguable that just bumping the base rate doesn't do a great deal for those who're earning above the allowance but are still short of or just below the pretty low median income?

Whilst a 2% rise in IT would obviously bring someone on £20k and someone on £40k's after tax income closer, it's likely that the squeeze on the lower earner's income would be harder felt is it not?

Depends what you mean by "Holyrood's current income tax power".

If you mean the Scottish Variable Rate, which the SNP elected not to use, it was a power to alter the base rate of income tax by plus or minus 3% of what the UK base rate was at that given moment in time. While the base rate was at 20%, this would have meant the power to increase the income tax liability of a higher rate taxpayer by £950 or so. It would have increased the effective income tax rate of someone on £42k or so from 15.0% of their gross income to 17.3% of their gross income. For someone on £80kpa it would rise from 26.8% to 27.9% Someone on the median household income (£26k or so UK-wide, slightly lower for Scotland) would be liable for about £462 additional tax bill, which would represent a rise from 11.8% of their income to 13.6%. For someone on the minimum wage it would have increased their tax bill by £72, or from 3.7% to 4.2% of their gross income.

As far as I can see therefore, using the Variable rate would have increased all full-time workers' taxes, but in cash terms it would have hit the top 20% of earners most, and in percentage terms it would have hit those in the middle hardest. In all cases the impact on the poorest would have been negligible and less hard felt.

If you mean the Calman powers, which I think Swinney will be exercising in the up-coming budget, he gets to set a rate of tax over and above 10% that the Treasury has already set. This is subject only to a condition called the "lockstep" which means that if he raises one band he has to raise them all, by the same percentage in the pound. I can't work out for certain what the impact this would be without sitting down and working at it properly, but it means any tax rise *should* be, intuitively, more progressive, as a 3% rise would hit higher rate payers both on their basic rate income and their higher and additional rate income, whereas it would only affect most people on their basic rate income. This obviously ignores the behavioural effects of raising taxes and the impact on total revenue, but its effects in principle should be more progressive than when the rate was only variable.

In my judgment, and you might well disagree, raising the basic rate by 3% under Holyrood's original tax power would have hit people on poverty wages least, middle income earners most and high earners for actual revenue but moderately otherwise, in terms of ability to pay. I think it's interesting that that power was never used, and I suspect it's because both the Labour-led Holyrood administration and the SNP one that inherited it, realised quickly that using that tax power would hit middle-income professional Scotland: the teachers, lawyers, local government workers and bank clerks hardest. Precisely the people who vote and who are the swing voters in a Scottish election. So they left it well alone. It broadly buys into my assessment of Scottish politics that despite the rhetoric, all the fighting isn't about the vulnerable and the disadvantaged at all but about keeping the middle 50% happy with electoral bribes. We've seen it on tax and we've seen it in the form of universal spending commitments like university tuition, personal care for the elderly and prescription charges.

Scotland's not left wing. The SNP's not left wing. Labour aren't left wing. We're a bunch of tight-fisted conservative centrists who like to shout the word "social justice" a lot.

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What sort of re-distributive policies are you hoping for next year ? I assume because you're waiting then you know what you're waiting for.

One will be fine.Removing the bonkers freeze on council tax ive got my chequebook out ready to go.

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Depends what you mean by "Holyrood's current income tax power".

If you mean the Scottish Variable Rate, which the SNP elected not to use, it was a power to alter the base rate of income tax by plus or minus 3% of what the UK base rate was at that given moment in time. While the base rate was at 20%, this would have meant the power to increase the income tax liability of a higher rate taxpayer by £950 or so. It would have increased the effective income tax rate of someone on £42k or so from 15.0% of their gross income to 17.3% of their gross income. For someone on £80kpa it would rise from 26.8% to 27.9% Someone on the median household income (£26k or so UK-wide, slightly lower for Scotland) would be liable for about £462 additional tax bill, which would represent a rise from 11.8% of their income to 13.6%. For someone on the minimum wage it would have increased their tax bill by £72, or from 3.7% to 4.2% of their gross income.

As far as I can see therefore, using the Variable rate would have increased all full-time workers' taxes, but in cash terms it would have hit the top 20% of earners most, and in percentage terms it would have hit those in the middle hardest. In all cases the impact on the poorest would have been negligible and less hard felt.

If you mean the Calman powers, which I think Swinney will be exercising in the up-coming budget, he gets to set a rate of tax over and above 10% that the Treasury has already set. This is subject only to a condition called the "lockstep" which means that if he raises one band he has to raise them all, by the same percentage in the pound. I can't work out for certain what the impact this would be without sitting down and working at it properly, but it means any tax rise *should* be, intuitively, more progressive, as a 3% rise would hit higher rate payers both on their basic rate income and their higher and additional rate income, whereas it would only affect most people on their basic rate income. This obviously ignores the behavioural effects of raising taxes and the impact on total revenue, but its effects in principle should be more progressive than when the rate was only variable.

In my judgment, and you might well disagree, raising the basic rate by 3% under Holyrood's original tax power would have hit people on poverty wages least, middle income earners most and high earners for actual revenue but moderately otherwise, in terms of ability to pay. I think it's interesting that that power was never used, and I suspect it's because both the Labour-led Holyrood administration and the SNP one that inherited it, realised quickly that using that tax power would hit middle-income professional Scotland: the teachers, lawyers, local government workers and bank clerks hardest. Precisely the people who vote and who are the swing voters in a Scottish election. So they left it well alone. It broadly buys into my assessment of Scottish politics that despite the rhetoric, all the fighting isn't about the vulnerable and the disadvantaged at all but about keeping the middle 50% happy with electoral bribes. We've seen it on tax and we've seen it in the form of universal spending commitments like university tuition, personal care for the elderly and prescription charges.

Scotland's not left wing. The SNP's not left wing. Labour aren't left wing. We're a bunch of tight-fisted conservative centrists who like to shout the word "social justice" a lot.

Yep, obviously a standard bump in the base rate would take proportionally more cash from higher earners and more cash in total from higher earners but given that 'disposable' (for want of a better word) income rises at a higher rate than total income as salary increases, then a 2% drop in income for a low earner is fairly likely to hit harder than a 2.5% drop in income for a medium or higher earner, for example.

I don't have a strong view on this 'are the SNP bad for not raising taxes or not'. i just think the current income tax power of the Scottish Parliament is a very blunt tool for what is a fairly complex issue.

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One will be fine.Removing the bonkers freeze on council tax ive got my chequebook out ready to go.

You'll be paying whatever Nicola decides to charge you.

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So what's your political party of choice, champ?

don't have one, depends on what their policies are, and their track record. I'd say most of the electorate are like this. Blindly supporting a party's every policy is for mugs.

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I realise my post above might be quite difficult to follow but hopefully this helps illustrate what I'm talking about:

post-9316-0-92391400-1440708672_thumb.pn

ETA: Assumptions rely on this tax year's personal allowance (£10,600) and thresholds. The £13k figure is an accepted figure for a full-time job on the minimum wage.

A basic rate rise of 3% would take:

0.0% off a part-time minimum wage worker's annual income

0.6% or so off a full-time minimum wage worker's annual income

1.8% or so off someone earning the median annual household income

2.3% or so off moderately experienced professional and private sector earners

1.6% or so off a GP

1.0% or so off the First Minister

Edited by Ad Lib

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Yep, obviously a standard bump in the base rate would take proportionally more cash from higher earners and more cash in total from higher earners but given that 'disposable' (for want of a better word) income rises at a higher rate than total income as salary increases, then a 2% drop in income for a low earner is fairly likely to hit harder than a 2.5% drop in income for a medium or higher earner, for example.

I don't have a strong view on this 'are the SNP bad for not raising taxes or not'. i just think the current income tax power of the Scottish Parliament is a very blunt tool for what is a fairly complex issue.

I don't necessarily disagree with anything here, but a quick set of calculations shows that a minimum wage worker would be seeing only 0.6% or so come off their income in the event of a 3% rise, whereas those in the middle and just above would be swallowing a cut in their take-home pay of between 3 and 4 times that (in *percentage* terms). I think it's pretty inarguable that a base rate rise hits the second highest quartile of earners hardest and the lowest quartile of earners least, even allowing for disposable income considerations.

Edited by Ad Lib

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I realise my post above might be quite difficult to follow but hopefully this helps illustrate what I'm talking about:

attachicon.gifSVR.png

ETA: Assumptions rely on this tax year's personal allowance (£10,600) and thresholds. The £13k figure is an accepted figure for a full-time job on the minimum wage.

A basic rate rise of 3% would take:

0.0% off a part-time minimum wage worker's annual income

0.6% or so off a full-time minimum wage worker's annual income

1.8% or so off someone earning the median annual household income

2.3% or so off moderately experienced professional and private sector earners

1.6% or so off a GP

1.0% or so off the First Minister

Yeah, sorry, I get that principle. What i mean is that the cash difference of a 3% increase in the BR to someone on £20k would be around £280 p/y. The cash difference to someone on £40k would be around £880.

Obviously that's a larger %age increase of total income for the £40k earner but I'm fairly confident that once you boil it down to 'money that's left available to you after you pay for essentials/basic things you need to live', there's a good chance that £880 is a smaller %age of the £40k earner's pot that the £20k earner's.

I'm not even necessarily saying that's not fair. How much of your income you should be paying in tax is entirely arbitrary and so is proportionately how much higher earners should pay. Nobody can come on and give the magic formula that would be fair for everyone.

i just think that if your goal is a more economically redistributive society, fiddling around the margins with rates which come in at predetermined levels isn't a particularly powerful tool and isn't necessarily as simple as saying 'more tax = more redistribution" when it comes down to how it actually affects people.

I'm not speaking for anyone or defending anyone's position but raising wages and raising the personal allowance would seem to be far better ways of achieving fair redistribution. I'd raise corporation tax and then introduce tax credits for companies who pay wages at a certain %age of their turnover as well.

This whole thing of 'can we move minuscule amounts of cash around between people who have nothing, next to nothing, a wee bit, and a fair bit' seems to be completely pissing around the edges.

Edited by Gordon EF

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Because I'm bored and have nothing else to do on a Thursday night, I thought I'd show what the effects of a 3% basic rate rise (with the lockstep) on effective tax rates under the Calman powers Swinney will be exercising in his next budget.

post-9316-0-90451300-1440710964_thumb.pn

As you can see, the Calman proposals represent an improvement insofar as any increase in tax rates in Scotland is concerned, because any change is automatically more progressive in terms of effective rates.

I would actually say the main problem with the Scottish Parliament's tax powers are completely unrelated to progressivity. Certainly the lockstep is imperfect, as you can't raise the taxes on the top 20% of earners without at least slightly raising it on the 60% or so immediately below them, albeit by less as a proportion of their income. The real problem is that the current powers don't give much flexibility to maximise revenue from the richest, which is a different problem from making them pay a higher income proportion. This actually relates to how you *cut* taxes and structure incentives, rather than the rates in and of themselves.

Inconveniently for the SNP, these arguments are not left-wing arguments. They're incredibly centrist, and some of them even centre-right ones. It means buying into aspects of "neoliberal economic orthodoxy" that they like to pretend to naive voters that they are rejecting.

For people like me, the SNP not being left wing is absolutely fine. Indeed, their centrism is at the heart of the way they've taken professional middle class Scotland away from Labour and the Tories. I'd just like them to be honest that that's what they've done and that the middle class are the people they prioritise in their tax raising and public spending policies. It sticks in the craw that they are the most effective champions of the economic orthodoxy their supporters so viciously decry.

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Yeah, sorry, I get that principle. What i mean is that the cash difference of a 3% increase in the BR to someone on £20k would be around £280 p/y. The cash difference to someone on £40k would be around £880.

Obviously that's a larger %age increase of total income for the £40k earner but I'm fairly confident that once you boil it down to 'money that's left available to you after you pay for essentials/basic things you need to live', there's a good chance that £880 is a smaller %age of the £40k earner's pot that the £20k earner's.

I'm not even necessarily saying that's not fair. How much of your income you should be paying in tax is entirely arbitrary and so is proportionately how much higher earners should pay. Nobody can come on and give the magic formula that would be fair for everyone.

I don't disagree with any of that, but within the frames of reference of the generally accepted definition of redistribution it is unarguably the case that the powers the Scottish Parliament was given were perfectly capable of increasing the burden of the richest by relatively more than the poorest. The comparison has to take into account that the poorest are already being taxed. The principle has been conceded, and their disposable income is already being reduced. Some of us, we're called the Liberal Democrats, did explicitly seek to challenge that orthodoxy by raising the personal allowance towards minimum wage income. It's almost as though we cared about the poor or something.

i just think that if your goal is a more economically redistributive society, fiddling around the margins with rates which come in at predetermined levels isn't a particularly powerful tool and isn't necessarily as simple as saying 'more tax = more redistribution" when it comes down to how it actually affects people.

I'm not speaking for anyone or defending anyone's position but raising wages and raising the personal allowance would seem to be far better ways of achieving fair redistribution. I'd raise corporation tax and then introduce tax credits for companies who pay wages at a certain %age of their turnover as well.

I'm glad you've come round to what is mainstream Lib Dem thinking and what we've been delivering in government for the last 5 years... :P

This whole thing of 'can we move minuscule amounts of cash around between people who have nothing, next to nothing, a wee bit, and a fair bit' seems to be completely pissing around the edges.

This is what any tax power does though, if we're completely honest. It's all about fiddling about with thresholds and margins here and there. A threshold here, a rate there, and sooner or later it adds up to real redistribution. That's all governments really can do. But when they don't do it, I want us to ask why, and not in an accusatory way. The reason the SNP don't fiddle around these edges is because they know that they're constrained by the same economic and political orthodoxies that everyone else is. Having full control over income tax won't mean that they can do much of any note more than the UK government already does, and which the Scottish Parliament cannot already supplement, to get the rich to pay more of what is pereceived to be a "fair share" of income tax revenues.

My problem with the SNP has always been their desire to whip up an alternative reality. The truth is politicians can't do very much to make a huge difference to people's lives and it's not all Westminster's fault. The alternative is a marginally more risky but potentially marginally less shit life for a reasonable number of people. It's not a utopia. It's a different mixture of fiddling at the edges.

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Still, you gave us the pleasure of a glimpse into your smashing sweater collection when you were pictured with Nick Clegg.

For that alone, I thank you.

Not to mention putting P&B on the map with a famous (yet slightly mediocre) attempt at a Dale Carrick on live tv

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Was it your mum or dad that joined?

Hilarious. No. They were part of the notable increase in membership enjoyed by the Scottish Lib Dems' North East contingent.

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I'm glad you've come round to what is mainstream Lib Dem thinking and what we've been delivering in government for the last 5 years... :P

If only I'd known... :rolleyes:

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Im waiting on the SNP to deliver on the rhetoric of "redistribution" which they manifestly have not done at Holyrood.Pointing at Labour policy is fine but the SNP are in a position to carry theirs out.Again no debunking of basic points.

PS looking forward to pumping you at weekend......at Somerset of course.

Lawlz. It's like the mewling unionist who say "But the SNP won't shut up about a second referendum", when the only ones NOT talking about a second referendum are the SNP.

Do you genuinely think another party could have made a better fist of Scottish governance than the SNP have done in the last 8 years?

don't have one, depends on what their policies are, and their track record. I'd say most of the electorate are like this. Blindly supporting a party's every policy is for mugs.

I have said before I don't blindly support every policy. I was against their decision on assisted dying, for example. What is undoubtedly for mugs is people who automatically yell "snpbad" at everything the party does. That's the true mark of a douche.

Not to mention putting P&B on the map with a famous (yet slightly mediocre) attempt at a Dale Carrick on live tv

I was too entranced by his foppish plethora of unkempt hair to notice.

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Lawlz. It's like the mewling unionist who say "But the SNP won't shut up about a second referendum", when the only ones NOT talking about a second referendum are the SNP.

Do you genuinely think another party could have made a better fist of Scottish governance than the SNP have done in the last 8 years?

I have said before I don't blindly support every policy. I was against their decision on assisted dying, for example. What is undoubtedly for mugs is people who automatically yell "snpbad" at everything the party does. That's the true mark of a douche.

I was too entranced by his foppish plethora of unkempt hair to notice.

"mewling" again !! Someone needs a thesaurus to break the repetivity.

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Im no longer "debunking".I will be "exploding the myth" for a bit.

I doubt you've ever come anywhere close to doing either.

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