December 18, 2022

SNP budget threatens high-earner exodus

SNP budget threatens high-earner exodus

If you are successful in Scotland 54% of your income will be confiscated if you start to earn over £43,663.

Employees living in Scotland earning between £43,663 and £50,270 will now pay 22% more than their counterparts elsewhere in the UK, a 54% tax rate, as the Institute of Chartered Accountants of Scotland has highlighted.

Only 362,000 Scots pay the higher rate of tax, but together with the 15,000 who pay the top rate, they account for 60% of tax receipts. It doesn’t seem too smart for the SNP to persecute them if it wants to preserve Scotland’s tax base.

The Scottish economy faces further decline with higher taxes

And those 15,000 top rate taxpayers - who now have to hand over even more tax if they retain Scottish tax residency - account for 16% of tax receipts. The top rate is now £125,140, which may sound a lot, but due to inflation it’s the equivalent of only £82,579 in 2010.

Similarly, inflation has debased our currency to such an extent the higher rate of £43,663 is the equivalent of £28,812 in 2010. It’s a really low salary level at which to start confiscating over half of Scots’ income.

£82,000 in 2010 is worth £125,000 today

Moreover, as the Scottish Fiscal Commission pointed out, hiking higher marginal rates of tax will actually raise less revenue. Revenue raised from earlier tax hikes is £200 million less than if the Scottish government had kept taxes the same as the rest of the UK.

There are lots of possible ways to abandon Scottish tax residency and no-one can police them properly. For each 1,000 who change residency Scotland will lose at least 1% of its income tax base, probably more, as the highest taxpayers will tend to act first.

If the percentage of those giving up Scot tax residency matched that moving from California to low tax states, 17,000 people would leave Scotland every year, many of them amongst the highest taxpayers.

Economic growth in Scotland is already much lower than the rest of the UK. An exodus of the most entrepreneurial and successful, combined with the drying up of a quantity of inward investment, will kill off any growth altogether. Who then will pay for the public sector?