Progressive Tax Rates Linked To National Happiness: Study

09/08/2011 12:31 pm ET | Updated Nov 08, 2011

Detractors of Warren Buffett take note: The more a country taxes its richest citizens, the happier everyone in that country will be.

Such are the findings of a new study, led by University of Virginia psychologist Shigehiro Oishi, which compares 54 different countries and finds a correlation between progressive tax policies -- that is, higher tax rates for higher tax brackets -- and overall contentedness.

It may not be the case that a progressive tax system automatically leads to a happier population, however. The report emphasizes that what matters is what governments do with the tax dollars they collect.

"[A] key to a happy society is quality public and common goods," a draft of the report notes. "[E]ven if a society does not adopt a progressive tax, as long as it can afford good public transportation, education system, health care, and so forth, citizens are likely to be happy."

The study observed the highest rates of "life satisfaction" in Canada, New Zealand, the Netherlands and a number of Nordic countries, including Norway, Denmark, Finland and Sweden -- all nations that consistently rank high whenever countries are compared on the basis of happiness.

The study also noted that many of these nations tax their richest citizens at a much higher rate than their poorest. Several other nations displayed a correlation between progressive tax rates and happiness, including Israel, France and the U.K.

A number of organizations have ranked nations by happiness in recent years, and offered a raft of explanations for why certain countries seem more satisfied than others. An extensive Gallup study in 2010 concluded that while rich countries are generally happier, so are societies where interpersonal relationships tend to be strong.

In June, 24/7 Wall St. analyzed a quality-of-life survey performed by the Organization for Economic Co-operation and Development, and noted that natural resources, economic stability, a strong services sector and "a good balance of work and leisure time" are all correlated with national happiness.

In the study examining the link between happiness and progressive taxes, the U.S. ranked fairly high among nations for happiness, but has only a mildly progressive tax policy. Some two dozen countries have tax policies more progressive than the United States', including Belgium, Mexico, Germany, Pakistan, Vietnam, Japan and Morocco.

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