Happy Taxpayers? Income Taxation and Well-Being
34 Pages Posted: 8 Jan 2013
There are 2 versions of this paper
Happy Taxpayers? Income Taxation and Well-Being
Happy Taxpayers? Income Taxation and Well-Being
Date Written: December 1, 2012
Abstract
This paper offers a first empirical investigation of how labor taxation (income and payroll taxes) affects individuals' well-being. For identification, we exploit exogenous variation in tax rules over time and across demographic groups using 26 years of German panel data. We find that the tax effect on subjective well-being is significant and positive when controlling for income net of taxes. This interesting result is robust to numerous specification checks. It is consistent with several possible channels through which taxes affect welfare including public goods, insurance, redistributive taste and tax morale.
Keywords: subjective well-being, taxation, public goods
JEL Classification: H21, H41, I38
Suggested Citation: Suggested Citation
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