The new US tax bill will be bad for the emotional well-being of tens of millions of Americans

Not so happy tidings.
Not so happy tidings.
Image: Kevin Lamarque/Reuters
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America’s Declaration of Independence enshrined the pursuit of happiness as a national goal. While the ultimate achievement of happiness will always remain elusive, the Republican tax bill being considered on Capitol Hill will create more unhappiness by eroding the economic conditions and the sense of well-being of scores of millions of Americans.

Increasing subjective well-being is of course not the only yardstick for judging legislation, but it is an important one. To understand how the tax bill might affect us, we can look to the field of positive psychology, which draws on Eastern religions, behavioral economics, and evolutionary biology, but principally on a shift among some psychologists from anxiety and depression to subjective well-being.

For more than twenty years, scholars in this field have explored the relationship between happiness and social change, often linking their findings with public calls for policy recommendations. As the nation encounters the most fundamental changes in US federal tax policy in a generation, positive psychology scholars have generally remained silent on how provisions in the bills on the table might affect America’s sense of well-being. Yet there are lessons that might be drawn from connecting insights from this field with proposed changes in American tax policy.

First, the tax bill is likely to impact research into how to promote well-being. By imposing an excise tax on net investment income of wealthy universities, legislation could make it more difficult for many schools to diversify their student bodies and support research, including into how to enhance personal and national happiness.

The proposed legislation also runs counter to the lessons the research of positive psychologists offers. Altruism is a virtue central in the field. The changes to the standard deduction, along with major changes in estate taxes, would erode an important incentive to make charitable contributions that help others, something that researchers have linked to the “Helper’s High,” the pleasure a donor gets from extending aid to others.

Given the finding that participation in organized religious life enhances social relations and a resulting sense of well-being, tax policy changes, by chipping away at contributions to religious organizations, including evangelical churches, could undermine how people achieve a sense of meaning. Scholars have also identified meaningful work as central to the pursuit of happiness. The proposed legislation, by holding out the hope of fostering capital expenditures, might accelerate the technological changes, such as the impact of self-driving cars and AI, already making meaningful work scarcer for millions of Americans to achieve.

Perhaps the most important wisdom positive psychology can provide us on the tax bill has to do with the relationships between happiness, personal income and wealth, and social conditions. The UN’s annual World Happiness Report reveals that Denmark, Norway, Switzerland, and the Netherlands ranked highest, with the United States placed well below. The strength of safety nets, social welfare policies, social trust, and relatively equal income distribution are factors often more important to well-being than affluence— all of which helps account for why some northern European nations outrank America in global studies of happiness. Most experts agree that the tax bill will weaken the safety nets and undermine social welfare policies.

On a somewhat similar note, researchers have shown that generally speaking, Americans are happier when income inequality is lessened—under the new tax bill, it is set to expand. In addition, scholars who study happiness have offered the often qualified but largely agreed-upon conclusion that above a certain level (let’s say 1.5 to 2 times the median household income of around $57,500), additional income provides little or only marginal increases in personal satisfaction. Scholars also emphasize the importance of loss aversion—people generally prefer to avoid losing money than gaining it, as losing money causes more pain than gaining additional money causes pleasure. Consequently, people who suffer losses under the legislation (generally speaking, many member of the working and middle class) will feel more pain than the pleasure experienced by those who witness gains. Moreover, below such presumably comfortable levels, the pain of poverty makes positivity difficult to achieve.

The implications of these studies seem clear. It is easier to maximize national well-being by lifting people out of poverty through tax relief than it is to enable relatively small numbers of people to pay no estate taxes or to continue benefiting from favored treatment of carried interest. The happiness Republicans will feel at passing tax reform is in stark contrast to the unhappiness that will be felt by those suffering the consequences.