It is good that in your paper you included national insurance, so that people can look at the real rate of income tax. People often forget that when income tax goes from 20 to 40 per cent, national insurance goes from 12 to 2 per cent, so there is really an increase of 10 per cent rather than 20 per cent.
You have talked about migration, which is also covered in Professor Gavin McEwen’s excellent paper. You said:
“the flow of migrants into Scotland could be reduced if the higher tax rates in addition to the social and psychological costs deter immigrants.”
Professor McEwen said:
“In a 2014 paper, Anouk Bertier of SPICe”—
the Scottish Parliament information centre—
“surveyed the evidence for tax-induced migration in Switzerland.”
Obviously, Switzerland and Sweden have very high migrant populations, so they are not areas where you would expect there to be, for example, any issue in attracting migrants. Professor McEwen continues:
“While there is a federal income tax in Switzerland, it is ... relatively low rates and Cantons and Communities have considerable taxing powers including the right to tax income. She reports that two studies she consulted found evidence of high-income taxpayers taking level of taxation into account in choosing their place of residence while one found little such evidence.”
There seems to be quite a divergence of views on the issue.
Professor McEwen also talked about the diversity of taxation throughout the United States, with a plethora of corporate taxes, sales taxes and so on. He said:
“There is undoubtedly competition between authorities, and influence on migration as a result, but the diversity has been remarkably stable and has even tended to increase somewhat.”
If we look at pure economic factors, we would clearly expect migration to decrease if taxes went up, but what impact does the expenditure of those taxes actually have? For example, if I am thinking about moving the wife and weans to somewhere, I will be looking at not just a marginal tax rate but the schools, the public realm, the levels of crime, the relative cost of housing and so on. How much of an impact would these marginal rates have if, as you seem to be assuming, Scotland has higher tax rates and if folk are actually looking at Scotland as a place where they can have a higher quality of life?
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