Income, Taxes and Happiness * Alpaslan Akay Olivier Bargain Mathias Dolls
نویسندگان
چکیده
We combine the subjective well-being and the public finance literature analyzing the effect of paying taxes on individual happiness. Using a long panel of very rich German household data we show that conditional on net income paying taxes is associated with higher levels of happiness. Increasing taxes by 1 standard deviation yields an increase in happiness by 2.7 standard deviations. In accordance with optimal tax theory, this positive effect is higher for people who consume public goods more frequently and for individuals that benefit more from redistributive policies. When conditioning on gross income, tax payments lead to a reduction of personal income and, hence, exhibit a negative effect on subjective well-being. Decomposing the population into subgroups, we show that East Germans, who have been brought up in a system with much more government intervention, tend to be relative more happy to pay taxes. Following the intuition, more educated individuals and leftist individuals are happier to pay taxes. JEL Classification: D58, J23, H24, H60
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