Arthur Laffer, a prominent American economist known for his influential work on tax policy, has urged the United Kingdom’s new government to significantly reduce various taxes in the upcoming October budget to stimulate economic growth. Laffer, who previously advised leaders including Ronald Reagan, Margaret Thatcher, and Donald Trump, emphasized cutting the top rate of income tax and abolishing inheritance tax and stamp duty as key measures.

Laffer’s stance is grounded in his well-known Laffer Curve theory, which suggests there is an optimal tax rate that maximizes government revenue without discouraging economic activity. Beyond a certain threshold, higher tax rates may lead taxpayers to alter their behavior, reducing the expected revenue. He pointed to Scotland’s recent experience as evidence, where the highest income tax rate rose to 48 percent in 2024. According to Dan Neidle of Tax Policy Associates, Scottish taxpayers subject to the top rate paid £2.069 billion instead of the expected £2.091 billion, a shortfall attributed to tax avoidance and behavioral changes. Laffer interpreted the data as validating his theory and expressed optimism that Andy Burnham, the new prime minister, and Chancellor John Healey would take steps to ease the UK’s tax load, which the Office for Budget Responsibility projects will reach a postwar peak of 38.5 percent of GDP by 2030.

He criticized the stamp duty, a transaction tax imposed on property purchases, which ranges from 6 percent to 12 percent in Wales for properties above certain thresholds. Laffer highlighted its distortive effects on the housing market, noting a 9 percent drop in property sales year-on-year according to Zoopla. He argued that such taxes impair wealth mobility by making it costly to access capital tied up in property assets.

Laffer was also strongly opposed to wealth taxes, describing them as “the most destructive tax.” He warned that even a modest 1 percent wealth tax could have damaging effects equivalent to a much higher income tax rate. The idea of a wealth tax has gained traction in the UK, particularly promoted by the campaign group Patriotic Millionaires UK, which includes public figures like Gary Lineker and economist Gary Stevenson. The group advocates for a 2 percent tax on wealth exceeding £10 million. Laffer disputed this, suggesting wealth taxes would drive away affluent individuals, reduce economic productivity, and hinder employment growth.

Regarding income tax, Laffer recommended reducing the highest rate from 45 percent to 35 percent, arguing this would encourage wealthy expatriates to return to the UK. He proposed replacing the current progressive system with a broad-based flat tax that would incorporate VAT and eliminate deductions, exemptions, and credits. Laffer criticized the UK tax system’s complexity, asserting that simplification would reduce tax avoidance and administrative costs.

On inheritance tax, Laffer was unequivocal in calling for its complete abolition, describing it as “the most immoral tax.” He highlighted that current allowances have remained unchanged for years and expressed concern that recent and upcoming extensions of inheritance tax to assets such as family businesses and pensions would be harmful. Laffer cited his personal motivation for working at age 85, emphasizing his desire to leave a legacy for his descendants and calling death taxes “disrespectful to future generations.”

Laffer also urged the removal of stamp duty to ease transactional frictions in the housing market and boost economic activity. Currently, stamp duty rates vary across the UK, with threshold and band differences between England, Wales, and Scotland. The Conservative Party has pledged to eliminate stamp duty on primary residences if elected.

Overall, Laffer’s proposals focus on lowering tax rates broadly, simplifying the tax code, and removing taxes he views as impediments to economic growth and wealth creation in the UK.