Arthur Laffer has warned Andy Burnham that any further tax raid on wealth in the forthcoming Budget could prove a “disaster” for the UK economy.
The veteran American economist, best known for the Laffer Curve, said increasing the burden on wealthy individuals risked discouraging investment, reducing economic activity and driving high earners overseas.
His intervention comes as the Labour Government faces mounting pressure to raise additional revenue, with a wealth tax among the measures being discussed ahead of the Budget.
Laffer has argued that governments can ultimately collect less money when tax rates become too high, as individuals change their behaviour, defer income or move their assets and businesses elsewhere.
The warning is likely to intensify the debate within Labour over how to address the public finances without damaging growth. Supporters of a wealth tax say it could raise substantial sums from those with the greatest assets, while opponents argue that it could weaken investment and reduce the tax base.
Laffer’s central message to Mr Burnham is that Britain should focus on encouraging wealth creation rather than seeking to extract more from existing wealth.
