“Nightmare before Christmas” cried the front page of one Scottish tabloid, above a picture of Nicola Sturgeon photo-shopped as The Grinch. “Middle class hammered as party breaks election vow”. Newspaper headlines are not known for their grasp on reality, but even by tabloid standards this veered into intergalactic levels of hyperbole. A tax rise equivalent to £70 a year for a £40,000 earner cannot reasonably be equated to being savaged with a blunt instrument. People on £50,000 will actually pay less after last week’s Scottish budget, owing to a cross border tax anomaly.

Derek Mackay's latest effort was an imaginative exercise in fiscal manipulation, which wrong-footed the Scottish government’s critics and bamboozled most of the hostile press. Yes, it did break a manifesto pledge to freeze the basic rate of tax throughout this parliament. The Finance Secretary tried to claim that the 20% tax band had indeed been frozen, but that is disingenuous. The creation of the new 21p band will mean that half a million basic rate tax payers will be paying a higher rate of income tax – but so little that few will notice. There is an extra 1p on the higher 40% rate and the same on the additional 45% rate.

In 1999, the SNP proposed a 'Penny for Scotland' and were rejected at the ballot box. This is, in effect, the same policy, with a backstop to prevent anyone earning less than £24,000 from paying more. The Right may try to press the tax bombshell panic button, but times have changed. It is most unlikely to damage Nicola Sturgeon in the way the original penny appeared to damage Alex Salmond nearly 20 years ago. The almost pathological aversion to taxing income was so extreme at the end of the last century that Labour issued a pledge card promising never to increase income tax. Gordon Brown cut the basic rate from 22% to 20% and we learn from Brown's recent biography that Tony Blair wanted to cut the higher rate of tax to 35%.

The Scottish National Party should be congratulated, then, for breaking the irrational half-century-long taboo on raising income taxes on middle class earners. The Scottish Green Party is right to claim credit for providing the key to unlocking the tax system, by introducing new tax bands to ensure that no one earning over average earnings will have to pay more. Indeed, in this round, no one earning less than £33,000 a year will pay more in income tax – that is 80% of Scottish tax payers. This was a progressive and creative use of the tax system, and the hysterical Conservative attacks on the “Nat Tax” rebounded.

However, praise comes with a couple of caveats. First of all, no one should be in any doubt that, however progressive these measures are in themselves, they arguably target the wrong people. This is because income tax is not a tax on wealth as such, and it is the wealthy who have benefitted massively from the recent asset price inflation. According to the Resolution Foundation, wealth is now twice as unequal as income. As the economic commentator, Robert Peston, has argued, we need wealth taxes to recover some of the trillion or so that has been syphoned up to the top since the financial crash. The people who caused it should not be seen to benefit.

The Scottish government will respond that it doesn't possess the powers to tax wealth, and this is absolutely correct. Holyrood has no powers to tax dividends, savings and other assets. Similarly it has no power to adjust VAT, National Insurance, Corporation Tax etc – the source of nearly all of the “stealth taxes” deployed by UK Chancellors since the 1960s. The think tank Reform Scotland says that, largely for this reason, Mackay’s income tax increases are a “mistake” and that they risk actually reducing revenues because of “behavioural changes”. He says he will raise around £350m through the various income tax changes. We’ll see who is right when the numbers come in next year.

Ideally, Holyrood should have the full range of taxes at its disposal, but it doesn't. In the absence of full fiscal devolution (which in itself would also risk reducing government revenues because of the full abolition of the Barnett bloc grant) the Scottish government was right to do what it could to mitigate the impact of austerity and raise public sector pay by 3% (though private sector workers in the midst of the longest pay freeze since the Napoleonic wars could be forgiven for posting their own hashtag #metoo). Reform Scotland is right, however, to warn that the SNP government should be extremely cautious about using income tax – it isn’t called the “toxic tax” for nothing.

Mind you, the howls of synthetic anguish from the business community can safely be ignored. CBI Scotland and the Conservative Party attacked the budget as an “assault on aspiration” that would damage the economy by penalising enterprise and forcing business-owners to relocate to England to avoid the raid on their incomes.

Those earning over £150,000 stand to lose £1,700 a year. Well, they should count themselves lucky that they are only paying 46% and not the full 50% tax band. The SNP pledged in their 2015 UK general election manifesto to restore the 50p tax band, but Derek Mackay has declined to introduce it in Scotland alone for fear of wealthy people hiring accountants to avoid paying it. He insists that his advisers told him the 50p rate would actually reduce revenues.

I don’t actually think that all those consultant surgeons, University Vice Chancellors and local government bureaucrats earning over £150,000 are going to vamoose just because of a few pounds in tax. Business people are even less likely to leave because they at least understand the maths. Higher earners are well compensated for marginally higher income tax by the universal benefits they get from living here. They may regard free bus travel and prescriptions as small beer. But their children will not have to pay university tuition fees of £9,500 a year, and when they are older they won't have to pay for their personal care. House prices are much lower in Scotland also and cities like Edinburgh score high on amenities and wellbeing. There's no getting away from it: living in Scotland is extremely good value for money.

There's so much nonsense talked about tax that you sometimes despair – and not just in right wing newspapers. The Scottish Labour leader, Richard Leonard's ultra-left attacks on this budget were misjudged. Voters aren’t stupid. They remember the June general election when “Marxist” Jeremy Corbyn said he would only increase taxes on those earning over £80,000 a year. SNP tax policy is more progressive than that of UK Labour, and the 3% pay increase for the public sector is as good as anything on offer down south. There is a continuing squeeze on local government, but at least Scottish councils now have the option of raising council tax.

Say what you like about Nicola Sturgeon trying to be all things to all people. That the SNP is over cautious and inclined to managerialism. But this was an astute and progressive budget that has placed Scotland in the vanguard of tax reform - not just here but in the entire UK.