Reusing variable name in different scopes

I saw that there is a similar bug around redefining a variable, but I believe this one is slightly different problem, here is the code:

#! /usr/bin/env python

from typing import Dict, List, Union

def main(arg):
	# type: (bool) -> Union[Dict[str, str], List[str]]

	if arg:
		var = list()
		var.append('something')
	else:
		var = dict()
		var['key'] = 'something'

	return var


if __name__ == '__main__':
	main(True)

The variable var while it uses the same name, it is technically a different variable, but mypy 0.630 is complaining about it:

$ ../py37/bin/mypy --python-executable ../py27/bin/python test.py
test.py:12: error: Incompatible types in assignment (expression has type "Dict[<nothing>, <nothing>]", variable has type "List[str]")
test.py:13: error: No overload variant of "__setitem__" of "list" matches argument types "str", "str"
test.py:13: note: Possible overload variants:
test.py:13: note:     def __setitem__(self, int, str) -> None
test.py:13: note:     def __setitem__(self, slice, Iterable[str]) -> None

Ideally it should have no problem with it and at the point where there is return statement it should just do an union so the type would be Union[Dict[str, str], List[str]]

Start with the test.py reproducer and the main function shown in the issue, then trace how mypy infers types for var across the if and else branches. Done means the example produces no incompatible-assignment or setitem errors and the return is treated as Union[Dict[str, str], List[str]].