In Who Says Money Can’t Buy Happiness?, Dwight R. Lee explains that even if money doesn’t buy happiness we shouldn’t tax it away:
Money probably doesn’t buy as much happiness as many people striving for financial success think it will. And surely some, maybe most, of us occasionally suffer from envy when a colleague receives a bigger raise than we do. Yet these are not new insights, and they hardly justify higher taxes and more government spending. Adam Smith pointed out in his 1759 book, The Theory of Moral Sentiments, that beyond some minimum amount, more money is unlikely to mean more happiness. But he also pointed out that while those who pursue money may not do much for themselves, they do a lot for others.
Smith tells the story of a poor man’s son who, because “heaven in its anger has visited with ambition,” struggles his entire life for wealth which, if “he should at last attain it, he will find to be in no respect preferable to that humble security and contentment which he had abandoned for it.” But Smith rejects the notion (fashionable in his day as well as in ours) that the ambition for material riches is an unworthy one. He insists that it is well that nature deceives some with this ambition, since this deception has prompted mankind “to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life.”
Any costs those who pursue wealth in the marketplace impose on others are swamped by the benefits they provide others by contributing to the general wealth. As a country’s wealth goes up, infant mortality goes down; death from childbirth goes down; death and injuries at work go down; traffic deaths go down; life expectancy goes up; health at all ages improves; poverty, as measured by what people are consuming, goes down; leisure time goes up; educational opportunities go up; environmental quality goes up; and communication and travel improve; to mention but a few measures of human well-being that improve with wealth. Government’s contribution to some of these improvements depended on the wealth created by people pursuing money. Furthermore, the best way to continue making these improvements is by maintaining the incentive to pursue money, not by increasing tax burdens on that pursuit.