A More Progressive Tax System Makes People Happier, 54-Nation Study Finds

[pampango]

... a new study comparing 54 nations found that flattening the tax risks flattening social wellbeing as well. "The more progressive the tax policy is, the happier the citizens are," says University of Virginia psychologist Shigehiro Oishi, summarizing the findings, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science.

The results: On average, residents of the nations with the most progressive taxation evaluated their own lives as closer to "the best possible." They also reported having more satisfying experiences and fewer discomfiting ones than respondents living in nations with less progressive taxes. That happiness, Oishi says, was "explained by a greater degree of satisfaction with the public goods, such as housing, education, and public transportation."

Higher government spending per se did not yield greater happiness, in spite of the well-being that was associated with satisfaction with state-funded services. In fact, there was a slight negative correlation between government spending and average happiness.

"That data is kind of weird," Oishi says. He guesses that the misalignment might indicate national differences in the efficiency with which those services are delivered or in people's relative ability to access them. For example, the U.S. spends more on education and health care than other developed countries, "but its international standing in those areas is not so great." Such puzzling findings may be illuminated in further research.

http://www.sciencedaily.com/releases/2011/09/110906152459.htm

[FiveGoodMen]

1. K&R!

[Stuart G]

2. K and R thanks for posting..nt

[Faryn Balyncd]

3. #5

[xchrom]

4. recommend

[DrunkenBoat]

5. It's not weird at all. Less inequality = more social happiness, all other things being equal.

Inequality breeds social/psychological problems, and the damage done by those can't be remediated by social spending, because social spending is generally a reinforcement of the existing inequality ("You get welfare/housing aid/food stamps/etc., you are inferior & I am superior").

I am convinced that after basic needs for food, shelter, clothing are met, the most important things for human beings are respect, competence, & to be needed/have a function/role in their family/community/society.

Inequality & phony 'competition' designed to draw an arbitrary line between the competent & incompetent screws the pooch on all that.

As an example of fake competition, take grading on a curve rather than by mastery of a task.

[indepat]

6. On the other hand, a very regressive tax system, as in the United States,

makes most of the uber-wealthy, with some noted exceptions, very happy as does it surely all Republicans elected to national office and far too many Democrats. :patriot:

[IndyPragmatist]

7. According to the OECD, we have the most progressive tax system

http://www.oecd.org/document/4/0,3343,en_2649_33933_41460917_1_1_1_1,00.html

[pampango]

8. Didn't see anything at the link to substantiate that. In the US "country notes"

the link led to the following information:

Rich households in America have been leaving both middle and poorer income groups behind. This has happened in many countries, but nowhere has this trend been so stark as in the United States. The average income of the richest 10% is US$93,000 US$ in purchasing power parities, the highest level in the OECD. However, the poorest 10% of the US citizens have an income of US$5,800 US$ per year – about 20% lower than the average for OECD countries.

The distribution of earnings widened by 20% since the mid-1980s which is more than in most other OECD countries. This is the main reason for widening inequality in America.

Redistribution of income by government plays a relatively minor role in the United States. ... This is partly because the level of spending on social benefits such as unemployment benefits and family benefits is low – equivalent to just 9% of household incomes, while the OECD average is 22%. The effectiveness of taxes and transfers in reducing inequality has fallen still further in the past 10 years.

Social mobility is lower in the United States than in other countries like Denmark, Sweden and Australia. Children of poor parents are less likely to become rich than children of rich parents.

[IndyPragmatist]

9. It's based on their numbers, you have to actually download the full report

By comparing the share of taxes paid by the top 10% to the share of income earned by the top 10%, you see that the USA comes in at a ratio of 1.35.

For comparison's sake, here are some other nations ratios.

United States
1.35
Ireland
1.26
Italy
1.18
Australia
1.29
United Kingdom
1.20
New Zealand
1.19
Canada
1.22
Finland
1.20
Slovak Republic
1.14
Luxembourg
1.15
Belgium
0.94
Austria
1.10
Korea
1.17
Poland
0.84
Japan
1.01
Norway
0.95
France
1.10
Denmark
1.02
Sweden
1.00
Iceland
0.90
Switzerland
0.89

[ChillbertKChesterton]

10. I've seen this number game played on Fox News all the time.

Of course the top 10% pay a higher percentage of the total tax revenue, because they have a disproportionately high share of the total income (and even higher proportion of the wealth).

Let's look at this with a simple example:


If you get 100 people, 1 of them with $999 and 99 of them with $1, the total revenue for everyone is $1098
If you tax the top 1% at a rate of 10%, you get $99.90, if you tax the bottom 99% at 50% (that is, tax HALF of their entire revenue), you get $49.5.

This is an incredibly skewed distribution with an incredibly regressive tax policy, but let's look at the analysis the same way you are pointing out:

The total tax revenue for the entire group is $149.40
of the total taxed revenue, the top 1% pays over 2/3 of all taxes, at 66.86%. This is with the top 1% paying a 10% tax rate.
of the total taxed revenue, the bottom 99% combined pays less than 1/3 of all taxes, at 33.13%. This is with the bottom 99% paying a 50% tax rate.


According to this analysis, that poor 1% is getting shafted because he pays a FAR higher portion of the taxes. This looks unfair, it looks EXTREMELY progressive, because 1% pays over 2/3 of all taxes while the bottom 99 combined pay only 1/3 of all taxes.

However, looking at the income levels and tax rates, it becomes clear that this is not the case. The top 1% gets 100 times the income that anyone else gets, and they pay only 1/5 of the tax rate that everyone else gets.

This is the problem with the "share of taxes" analysis.

[DrunkenBoat]

11. why don't you link the pages where those ratios come from.

not to mention that the share of income tax page to share of income ratio doesn't necessarily tell the whole story about the progressivity of the income tax. i'm dubious based on ireland's position as #2, among other things.

[ChillbertKChesterton]

12. This is a great study, I'm also interested in the correlation between

levels of income equality, or rather, equitable wealth distribution, and happiness.