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Why higher taxes will not help those in need

Terry smiling headThere have been many column inches, media statements and radio phone-ins about the ‘benefits’ that will result from the new Scottish tax regime.

The rich have been damned and the poor pitied. Ordinary’ citizens have declared their willingness to pay more tax if it helps those worse off than themselves.

But let’s be clear: we now have a more complex income tax system which will not result in any significant improvement in public services.

The numbers can be crunched in many ways. The SNP government tells us that more than two thirds of income taxpayers will pay less tax next year, while the Tories insist that “hundreds of thousands of workers will pay more income tax than those elsewhere in Britain.”

Of course, they are both right, but they are arguing the case from a different standpoint. The SNP is focused on shifting the burden of taxation from the lower to the higher paid, while the Tories believe higher taxation all round is bad for business and growth and Scotland’s competitiveness.

According to RSM, 55% of Scottish taxpayers will pay less tax than their counterparts in the rest of the UK. The flip side is that 45% will pay more tax and this is a key figure for those looking where to invest and employ labour. There are already stories around of bigger companies focusing their investment strategies in England.

And what about those much-quoted “improvements in public services” which the SNP, the Greens, LibDems and Labour expect to flow from the higher taxes?

Labour and LibDems say the tax plans do not go far enough while RSM’s head of tax Stephen Hay says the additional £219m raised only just covers the decrease in block grant funding at £200m.

So, after forcing a new tax system on HMRC and every payroll department in the country, Scotland will – at best – break even, and it will make little impact on the growing deficit which sits at £12 billion. 

Those who have been persuaded that paying more tax will help the needy look like they’ve been mugged.

 

 

 



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