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Study: The More a Country Taxes the Rich, the Happier its People

A few weeks after Warren Buffett called for higher taxes on the rich, new research says progressive tax rates are linked to happiness.

Billionaire businessman Warren Buffett, pictured above, argued in a New York Times op-ed last month that the U.S. government doesn't tax him and his super-rich friends enough. "I know well many of the mega-rich and, by and large, they are very decent people," wrote Buffett. "Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering." On the opposite end of the spectrum from Buffett are the few but wildly vocal Tea Party supporters, who advocate a flat tax or the "fair tax," a plan that taxes a person's spending, not their income.

Science can't tell us which of those plans is "right," per se, but it can help point us in the best direction. And if science is to be believed, it turns out Buffett may be onto something. According to new research to be published in an upcoming issue of Psychological Science, though progressive tax systems result in unequal tax burdens, they also tend to result in happier nations.

Using Gallup numbers from 2007, University of Virginia psychologist Shigehiro Oishi looked into the relationship between tax systems and quality-of-life polling in 54 nations. He discovered a direct correlation between a country's tax progressiveness and its happiness: On average, people taxed under the most progressive rates were more likely than anyone else to evaluate their lives as "the best possible." They also reported having more enjoyable daily experiences, and fewer negative ones.

Obviously people don't become happy because you tax them more. Rather, it appears that the public services provided by their taxes is what's really behind their joy. Writing about his study, Oishi noted that increased pleasure under the most progressive tax rates could be "explained by a greater degree of satisfaction with the public goods, such as housing, education, and public transportation."

In other words, taking the taxes people can afford to pay and applying them to the greater good results in everyone being happier. You've maybe known this since the "sharing is good" lesson from third grade. Now how to get through to those still calling for a fair tax?

Photo via (cc) Flickr user Aaron Friedman

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