8/20/2012 2:15 PM ET|
Rx for happiness: Tax the rich?
Sweden has the most progressive tax system of the countries studied, with the biggest difference between highest and lowest tax rates. At the other end were the flat-tax countries. The U.S. and Canada were on the lower end of the progressive scale.
What the researchers found, Oishi said, was a strong relationship between a tax system's degree of progressiveness and personal happiness, even after they controlled for other factors that affect well-being. On the national level, those factors include total wealth and income equality. On the personal level, they include income and marital status.
The study concluded that "if two nations were equally wealthy and income distribution was the same, people living in the nation with a more progressive taxation policy were more satisfied with their lives in general and had more positive daily experience and fewer negative daily experiences than people living in the nation with the less progressive taxation policy."
There were various outliers. People in flat-tax Saudi Arabia were about as happy as people in Israel, which has one of the more progressive systems. On the other end, folks in Latvia, another flat-tax country, were about as bummed as those in China, which also has a very progressive tax system.
But overall, the relationship between more progressive tax systems and more happiness was pronounced, the researchers said.
It's important to note that the study isn't saying flat out that more progressive tax systems cause more happiness. As in other studies of this type, the researchers found a relationship but can't say definitely why that relationship may exist.
"Of course we statistically controlled for the wealth of the nation, or income inequality . . . (but) there are many potential third variables/alternative explanations, as we recognize in the paper," Oishi told me in an email.
Still, people living in countries with more progressive taxation tended to be happier with the "public and common goods" that their taxes paid for.
"We showed that satisfaction with public goods seems to be one reason for the association," Oishi said.
Two factors weren't linked with greater happiness: Tax rates for the average worker and government spending as a percentage of economic output.
"Our findings therefore do not provide support for the simple 'big government' idea that the larger a role the government plays, the better the quality of life becomes," the researchers wrote. "Indeed, government spending as a percentage of GDP was associated with lower levels of subjective well-being."
So clearly, all we need to do is combine the two ends of the political spectrum: the Tea Party's mania for smaller government plus Occupy Wall Street's obsession with soaking the rich. Then everybody will be happier, right?
Riiiight . . .
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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