Here is a scientifically proven route to happiness: give money away, and not necessarily by stealth. More bizarrely, but in the same vein, pay taxes with pleasure.
Attitudes to spending money have moved on since the conspicuous consumption of the 1980s. Back then, the pursuit of happiness seemed to revolve around buying a mega mansion, Yves St Laurent suits, class A drugs and avoiding taxes at all costs. Today’s increasingly altruistic mindset presents the alluring possibility of a more equitable world — with happier givers as well as receivers.
Our parents always told us that doing good to others was the route to happiness, but now parental advice appears to be backed by scholarly articles and impressive formulas. According to research by Elizabeth W. Dunn, Lara B. Aknin and Michael I. Norton, of University of British Columbia and Harvard Business School respectively, giving disposable income to others makes you feel good.
The academics asked 632 Americans to rate their general happiness against their annual income and asked how much they spent on themselves and others. Then they worked with toddlers to see how they felt when encouraged to give away a treat. Guess what? Giving feels good. Finally, they looked at the correlation between charitable giving and happiness in 136 countries and found a positive relationship in 120 of the countries.
UK readers will no doubt already be aware that giving can have positive tax consequences. The easiest route to reducing inheritance tax bills is giving money away while you are still alive.
Leaving money to a charity in your will can further reduce how much inheritance tax is levied on the rest of your estate.
But you don’t have to die to reap the benefits of your generosity — the current Gift Aid rules enable higher-rate taxpayers to claim back relief on charitable donations via their annual tax return, although studies show very few people bother to do so.
Some experts have suggested offering tax breaks to people who make donations to reduce the UK’s national debt.
The British public gave some £10bn to charity last year, yet there were just 14 donations and bequests to reduce the UK’s national debt totalling just over £11,000.
But rather than using charity as a means of paying less tax, why not flip it around and regard paying more tax as your charitable duty?
In the US, a group of billionaires including the financier George Soros, Facebook co-founder Chris Hughes and philanthropist Liesel Pritzker Simmons may be about to put the theory into practice. Last week, they wrote an open letter calling for a new “moderate” tax on assets of the richest 0.1 per cent.
“A wealth tax could help address the climate crisis, improve the economy, improve health outcomes, fairly create opportunity and strengthen our democratic freedoms,” the letter explained.
This approach appears to have hit a nerve. A wealth tax has become a campaigning theme for Democratic senator Elizabeth Warren and other presidential wannabes. She has proposed an annual 2 per cent levy on those with $50m or more in assets, predicting it would raise $2.75tn over a decade.
Yet here in the UK, a wealth tax would be a vote-killing move for prime ministerial wannabes Boris Johnson and Jeremy Hunt, who have both set out plans to cut taxes for the wealthy rather than raise them.
Could a wealth tax still work if it were optional?
Cait Lamberton (Katz Graduate School of Business, University of Pittsburgh) reckons so. She suggests that giving choice to taxpayers can make us feel better about coughing up.
Ideas about a co-operative, more altruistic approach to money chime with two new books: Sir Paul Collier’s moving The Future of Capitalism and Colin Mayer’s equally thoughtful Prosperity. The former argues that reciprocity and co-operation from a local level to a global one will improve the world; Prof Mayer presents a similar argument from the corporate perspective.
Governments and corporations, as well as individuals, are finally recognising that it is in everyone’s interest to behave better and more responsibly and to look beyond profit to environmental, social and governance issues in every aspect of their operations.
In the words of BlackRock chief executive Larry Fink: “Society is increasingly looking to companies, both public and private, to address pressing social and economic issues.”
This is an area on which the FT focusing particular attention with a new hub called Moral Money.
But to return to the individual and giving, the Dunn, Aknin and Norton research suggests that in order to get greatest bang for your happiness buck, you need to let people know about your philanthropy. Just as Pink Floyd’s David Gilmour did when he gave the $21m proceeds from the sale of his guitars to ClientEarth, the non-profit environmental law group, boosting their visibility as well as their coffers.
Some philanthropists prefer to keep a low profile out of modesty or out of concern that they will be hounded by fortune hunters, charitable or otherwise. And high profile philanthropy goes against the grain of certain east coast and British families who have been educated to avoid ‘showing off’.
It seems to me that the important thing is that the giver gets some kind of recognition of a type that they appreciate or enjoy. So the fact that their name never gets added to a gallery’s new wing doesn’t matter so long as the giver is somehow recognised as someone who has done something decent.
One philanthropist I know was so moved by an example mentioned in Sir Paul Collier’s book that he tracked down the small charity in northern England not far from Sheffield where the author grew up. The charity, Grimm & Co, aims to help children up to the age of 18 to fulfil their potential through writing.
A week or so after he donated, a package arrived containing one toilet roll labelled “Parchment of Purification”; a tin of “Extreme Disappointment” (”open lid and prepare for anticlimax”, “ingredients: 85 per cent apathy”); “Extract of Genius” bath salts and other silly bits and pieces. Collectively they added up to a charming and bonkers “thank you”.
The offerings made my philanthropic friend laugh and feel appreciated. And the charity has won itself a devoted supporter.