Speaking of financial wellness, did you know taxes can actually make you feel happier?

Wait, Paying Income Tax Actually Makes You Feel…Happier?

By Elizabeth Letsou

Stress. Refund. Dread. Confusion. Scared. Terrified. Paralyzed. Complicated. Misunderstanding. These are probably some of the words that come to mind when you think about paying income taxes.

Did you know that paying income tax can actually make you feel…happier? Sounds weird, right?  Well, there’s actually a pretty cool explanation for this phenomenon — keep reading to learn more about paying income taxes and how Nav.it can support you (financially and emotionally) through this stressful time.

First things first — dislike ≠ aversion

So, a common misconception about paying income taxes is that because people don’t like to do it, they must also not want to do it. This isn’t exactly true because disliking something doesn’t mean you’re completely averse to doing it. 

In other words, paying income taxes makes a lot of people feel like they are contributing to a larger, greater cause and it gives them a sense of purpose and pride. 

Thus, while many Americans may not exactly enjoy tax season, they still willingly participate in paying income taxes, and, in doing so, might actually reap some positive psychological benefits. According to a Psychology Today article by Dr. Utpal Dholakia called “Paying Income Taxes Makes Us Happier,” many Americans equate paying income taxes with performing a morally righteous civic duty. 

Paying taxes triggers feelings of reward

Break down of taxable income

Okay but, how exactly does this work? What is it about paying taxes that makes people feel this way (aside from the obvious — fulfilling a civic/moral responsibility)? 

Before I go on to talk about taxes specifically, I want to bring up a 2007 study conducted by economists William Harbaugh and Daniel Burghart, as well as the psychologist Ulrich Mayr. In the study, 19 women were given $100 and were split into two groups — one condition mandated that the women had to donate some amount of money ($15, $30, or $45) to a food bank, and the other condition allowed the women to choose if they wanted to make a contribution. 

The study found that, even when the women were forced to give a certain percentage of their allowance to a food bank, they still felt an increased sense of reward (measured by brain activity in the ventral striatum area). We often subscribe to the belief that being forced to give up one’s money is an inherently bad and stressful process. However, the study seems to dispel this notion — after all, the women still felt good about themselves even when they didn’t have a choice as to whether or not they could donate!

If we apply this logic to paying income taxes, we get a very similar result: people feel good about themselves for paying income tax, even though they don’t get a say in the matter. 

“Tax morale” and happiness 

You might be asking yourself: what if that study’s just a fluke? Maybe this phenomenon isn’t that real after all. 

Well, the 2007 food bank study isn’t the only one of its kind. In a 2011 study, Italian economists Diego Lubian and Luca Zarri actually set out to measure something similar. They were interested in the association between “tax morale” and happiness. (Tax morale basically means: to what extent do participants view paying taxes as an important civic/moral responsibility?)

And, Lubian and Zarri eventually found that there is a strong correlation between tax morale and happiness — so, the more important paying taxes is to someone, the happier they will be. 

Lubian and Zarri concluded their study with a positive note:

Our results suggest that people pay taxes also because they like it: due to a sense of moral obligation, they feel intrinsically motivated to do it and this generates positive hedonic effects…because of our nature as moral beings, humans take pleasure in acting ethically and are pained when acting unethically.

Evading taxes and lower subjective well-being

Break down of taxable income
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Still not convinced yet? I think at this point it’s important to bring up a final study by political scientists Ada Ferrer-i-Carbonell and Klarita Gërxhani. These researchers found that those who evade paying taxes can actually expect to experience lower levels of subjective well-being. (Note that well-being is characterized as “subjective,” as there is no “objective” measure of one’s happiness.)

So, not only do those who pay income taxes feel a sense of reward and happiness, but those who attempt to skirt this responsibility will ultimately deal with negative psychological (and possibly financial) consequences.

What can Nav.it do for me?

Now that we’ve established this clear link between paying income taxes and happiness, what can you do to maintain your financial and emotional well-being during this upcoming tax season? I’m glad you asked! 

Nav.it might just be the solution you’ve been searching for. Nav.it provides a lot of great resources to its users in order to help them better understand topics like taxable income, tax exemption, and stimulus/unemployment benefits. 

Remember: information is power. The more you know about taxes, the more prepared you’ll feel for this year’s upcoming tax season. And, the more you’ll be able to actually reap the super cool psychological benefits of paying income taxes on time!

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