“Let the debate commence,” says the Resolution Foundation
“Scottish Labour has a tax policy – specifically a tax raising policy. That’s a big change, whether you support it or not. In the decade and a half since devolution it is the first time the party will go into a Scottish Parliamentary election with proposals to change income tax,” says the Resolution Foundation, whose director, Torsten Bell, has released the following analysis on the distributional impact of Scottish Labour’s income tax proposal:
The sums raised by a 1p increase in the Scottish Rate of Income Tax could be the equivalent of reducing the scale of day to day spending cuts the Scottish block grant faces by around a third.
The proposed £100 rebate would prevent any individual earning under £20,000 losing. However most of the spending on it would go to households in the top half of the income distribution.
The overall impact is progressive. The richest ten per cent of households lose around £1,000, while 15 per cent of households in the bottom half of the distribution actually gain from the policy and the majority are unaffected. That leaves open questions of whether it is progressive enough.
The policy’s interaction with Universal Credit (as it is rolled out in coming years) would partially compensate low-income households for the extra tax they pay. But that would potentially be at the cost of reducing the amount of revenue raised.