…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. …Well-being was expressed in people’s assessments of their overall life quality, from “worst” to “best possible life,” on a scale of 1 to 10; and in whether they enjoyed positive daily experiences (such as smiling, being treated with respect, and eating good food) or suffered negative ones, including sadness, worry, and shame. …The degree of progressivity was measured by the difference between the highest and lowest tax rates, corrected for such confounding factors as family size, social security taxes paid, and tax benefits received by individuals. The results: On average, residents of the nations with the most progressive taxation evaluated their own lives as closer to “the best possible.”
The actual study isn’t available yet, but the release from APS screams junk science – especially since a study of American states found that high taxes lead to unhappiness.
But we should be skeptical of all this research. There are myriad pitfalls, including cultural differences.
But the most obvious problem is causality. Even if we assume it’s possible to make accurate cross-border comparisons of happiness, is there any reason to think that progressive tax rates are a causal factor, one way or the other? Heck, we may as well assume that crowing roosters cause the sun to appear.
Here’s one very obvious guess about what may cause the APS results. I’m guessing that people in Sweden and Denmark say they are happy. That’s not too surprising. They live in rich countries. But those countries became rich before the welfare state began and before high tax rates became the norm. So does it make sense to say they are happy because of high tax rates?
People in Mongolia and Bulgaria, by contrast, probably aren’t as happy as people in the Scandinavian nations. They live in relatively poor nations that suffered from decades of communist enslavement. In recent years, though, both nations implemented flat taxes in hopes of spurring growth and catching up to the rest of the world. But progress doesn’t happen overnight. So does it make sense to say that they are unhappy because the tax system isn’t “progressive”?
Ironically, the APS release does include the following results.
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.
Since we do have good evidence that economic growth suffers as government expands, this conclusion makes a lot more sense.
But I’m still skeptical about happiness studies. Seems like they might suffer from the credibility issues associated with global warming research.
Actually, I retract that statement. Happiness research may be imprecise and susceptible to bias, but I doubt people in that field would ever make a claim as absurd as global warming causes AIDS. And I doubt they would try to do something as stupid as rationing toilet paper or create something as silly as a hand-cranked vibrator.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 1st, 2014 | John Ransom
In Other News: Mary Landrieu Connects with Millennials; Lists Parent’s Basement as Louisiana Address | Michael Schaus
In Other News: Warren Buffet's Secretary Unavailable for Comment on Burger King Tax Move | Michael Schaus