A new study says that might just be how it works, as long as the taxes are progressive. The study was conducted in 54 nations with over 59,000 respondents. The polling tracked the expressed well being of respondents and then checked for correlations in taxation systems. The end result? On average, those who lived in a country with a highly progressive tax system reported a higher level of quality of life, more positive daily experiences, and fewer negative ones. Overall, people are happier the more progressive their tax system is.
It's an academic paper and the authors don't jump to any political conclusions, but they do provide at least one plausible explanation. The study notes that simply increasing government spending does not increase overall happiness. But people are happier in countries with higher levels of progressive taxation because they are more satisfied with basic government services, such as quality of education and health care.
Our country is one of the lowest taxed, as a percentage of GDP, of all the developed nations in the world. But how progressive is our taxation system? Rick Warren got in trouble a little while back for tweeting that half of Americans pay no taxes. He retracted it quickly when he found out it wasn't true but it's a rumor that has had some staying power. It is true that half of Americans don't make enough money to pay federal income tax. But that still leaves payroll taxes, state income taxes, sale taxes, and other taxes collected in the form of fees.
According to Citizens for Tax Justice, the lowest 20 percent of income earners (those with an average cash income of 12,500 a year) are paying about 16.2 percent of their income in taxes. The next 20 percent (those with an average cash income of 25,300 a year) are paying 20.7 percent of their income in taxes. The top 1 percent (with an average cash income of 1,254,000) are paying more but still just 30 percent of their total income. But if you go a step above that and calculate the tax rate for the 400 richest Americans in 2008, you find that they only paid 18.1 percent of their income in taxes. That is less than those making an average of 25,300 a year.
Forms of progressive taxation were an integral part of Jewish law. Progressive taxation is an important part of a just society, and now it's clear that it's part of a happy country.