Happy Taxpayers? Income Taxation and Well-Being

Alpaslan Akay (), Olivier Bargain, Mathias Dolls, Dirk Neumann (), Andreas Peichl and Sebastian Siegloch
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Alpaslan Akay: University of Gothenburg

No 6999, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 (search for similar items in EconPapers)
JEL-codes: H21 H41 I38 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-11
New Economics Papers: this item is included in nep-acc, nep-hap, nep-ltv, nep-pbe and nep-pub
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Citations: View citations in EconPapers (16)

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Working Paper: Happy Taxpayers? Income Taxation and Well-Being (2012)
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