Progressive Taxation Makes People Happier

There’s a common response the Occupy movement that goes something along the lines of “well, you can complain about the rich, but raising their taxes won’t solve your problems.” From a psychology standpoint, it appears to be a good response. Most of the time you don’t feel better about life because of something that happens to somebody else. However, in this instance that doesn’t appear to be the case because there is comprehensive correlational evidence that progressive taxation does make people happier.

Consistent with Rawls’s theory of justice, our results showed that progressive taxation was positively associated with the subjective well-being of nations. However, the overall tax rate and government spending were not associated with the subjective well-being of nations. Furthermore, controlling for the wealth of nations and income inequality, we found that respondents living in a nation with more-progressive taxation evaluated their lives as closer to the best possible life and reported having more positive and less negative daily experiences than did respondents living in a nation with less- progressive taxation.

It’s still unclear what causes this relationship, but there is both survey and experimental evidence pointing to the fact that inequality decreases trust. Less trust isn’t quite the same as more anxiety and fear (and thus less happiness), but the two outcomes are on the same spectrum.

On another note, if Mitt Romney happens to be feeling comfortable right now the above inequality-trust paper has a finding that should keep him up at night.

We find that there are less trusting behaviours when subjects know the income endowments of their co-players.

In other words, specific known instances of inequality lead to the most mistrust. Perhaps Romney should be publicly hanging out with people richer than himself so he can appear to be a victim of inequality.
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Oishi, S., Schimmack, U., & Diener, E. (2011). Progressive Taxation and the Subjective Well-Being of Nations Psychological Science DOI: 10.1177/0956797611420882

Hargreaves Heap, S., Tan, J., & Zizzo, D. (2011). Trust, inequality and the market Theory and Decision DOI: 10.1007/s11238-011-9287-y