High tax rates might not be good for your wallet, but they could be good for your overall happiness, according to the recently released United Nations World Happiness Report. According to the report, the world’s three happiest countries – Norway, Denmark, and Iceland, respectively – are all also the jurisdictions with the highest tax rates in the Organization for Economic Cooperation and Development (OECD) when considering their total tax revenue as a percentage of GDP.
So, why are the highest-taxed people in the world also the happiest? In part, it’s because tax money helps governments to buy and provision social goods.
“They are happy because these societies are not only prosperous but also with high equality, social trust, and honesty of government. They enjoy long paid vacations, zero out-of-pocket costs of health care, zero or low tuition costs, and quality public services for all,” Jeffrey Sachs, the report co-author and director of Sustainable Development Solutions Network, told CBS.
Sachs explained that happiness is the product of strong social foundations. By providing things like affordable healthcare, access to education, and paid leave, governments are able to provide citizens with this strong social foundation, in turn boosting happiness.
The World Happiness Report has been produced every year since 2012, and it’s arguably the world’s first happiness survey. It ranks 155 countries according to their happiness level. The report is the product of a resolution passed by the UN General Assembly inviting UN member countries to measure their citizens’ happiness. The aim was that by collecting and analyzing such data, it would be possible to identify common causes of both happiness and misery, as well as develop public policy accordingly.
Of course, happiness is a difficult thing to measure uniformly across the world, in part due to differences in cultural conception of what it means to be happy. In broad terms, however, the world’s happiest countries tend to be in North America and Scandinavia, with the world’s unhappiest countries largely concentrated in Africa and Asia.
So, what do the World Happiness Report’s findings on taxes mean for public policy? It may suggest that if countries want happier citizens, they should be inclined to hike up their tax rates.