Scotland Plans to Raise Income Tax, Further Diverging From U.K.

(Bloomberg) -- While U.S. President Donald Trump is in a race to cut taxes, one country on the other side of the Atlantic is planning to raise them.

Scotland’s semi-autonomous government in Edinburgh is seeking to increase some income tax rates by a percentage point to fund public services and tackle inequality, Finance Secretary Derek Mackay said on Thursday before presenting his budget to lawmakers. 

It will affect people earning more than 33,000 pounds ($44,200) a year, with the top rate on earnings above 150,000 pounds increasing to 46 percent compared with 45 percent for the rest of the U.K. There will be five tax bands starting at 19 percent compared with the current three starting at 20 percent.

Scotland won new taxation powers following the 2014 independence referendum that divided the nation. The Scottish National Party, the biggest party in the devolved parliament in Edinburgh, has sought to position itself as an opponent of austerity imposed by London, vowing to protect public services.

“This is a budget for a stronger economy and a fairer society,” Mackay said. “We are investing in our public services and supporting business to develop and thrive. This budget mitigates against the U.K. government’s cuts.”

Reform Scotland, an economic think tank, said the plans may end up producing less revenue for the government by prompting taxpayers to shift to dividend income or even move away from the country.

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