One of the things that makes me unhappy is paying a high rate of tax.

Second, the government should receive a lot less tax. A lot less. Why? Simply because they waste it and they derive no actual advantage (in happiness terms) from all this revenue - which can be used far more effectively by those that produced the wealth in the first place. The government and its socialist champions might think that money is important to them, but this is misguided and as a community we should not let such delusions guide important social policy.

And thirdly, liberty is a source of happiness so let have more of it

Bagaric has done ome excellent work in crimial law. McConville's main focus is corporate law - so it is fair to ask what these two academics would really know about economic issues in general and taxation in particular?

Firstly, basic factual error: Malcolm Turnbull has not said "the rich [are] not [paying] enough tax due to the operation of tax avoidance schemes." On the contarry, he said personal tax rates are TOO HIGH! See:
http://www.malcolmturnbull.com.au/news/default.asp

When two professional academics have basic facts wrong, one must seriously doubt their competence and objectivity on this issue.

Article makes constant reference to "the rich". Who exactly are "the rich"? What income qualifies one as "rich"? fifty throusand? Seventyfive thousand? One hundred thousand? Net or gross?

Some logical inconsistencies as well:
1. authors say that people are happy when they have "high degree of liberty", "are free to pursue their individual goals", and have "sense of participation and control" in their activities. However, all these happiness-creating things are eroded if hard-working people earn more money to achieve their financial goals, lose more than half of their income in tax!
2. authors say money doesn't make you happy - but then say poor are unhappy because they don't have any! OK, you could argue that they are actually unhappy because they can't afford basic necessities but what are basic necessities? In Australia, if they can't afford accomodation, it is provided free (or heavily subsidised). If they can't afford food, it is provided free. Education is provided free. Other social services are provided free (Actually not free - at taxpayers expense!)

Authors say: "important that every citizen in the community has means that are sufficient for them to afford the essentials of life. Thus, we must continue to raise taxation."

Raising taxation will just raise inflation and increase prices making things even less affordable. A market with minimal govt intervention, OTOH, results in competition and lower prices. For detailed discussion of basic economics see George Reisman's book, Capitalism:
http://www.capitalism.net/Capitalism/CAPITALISM%20Internet.pdf

Why, in Australia, do poor people exist? I personally know many people who Bagaric would consider "poor"- in fact I am related to some of them! They are not poor at all. Many have all the gadgets one could dream of. Others have no money because they drink, smoke and gamble it away.

Why should I, as a middle-income earner who is in top tax bracket but who works long hours and pays absurd amounts of tax, and therefore struggles to pay my mortgage and educate my child, pay for some lazy bum to sit at home and watch DVDs or for some dope-head's drug, drinking or gambling problem?

I note that article subtitle is: "A new perspective on progressive taxation". There is nothing new about it at all. It is plain old socialism. It has been tried and tested many times in history and it doesn't work.

The truth is that welfare and socialism has never brought people out of poverty. Instead, it keeps them there. In fact, it does worse - it spreads poverty. Anyone who disagrees, please cite an example of where socialism has led to a higher standard of living.

There is only one solution to poverty: Capitalism (by "Capitalism", I mean the free and peaceful exchange of goods and services).

Probably the most accessible refutation of the socialist mentality which pervades Bagaric and McConville's article, is Theodore Dalrymple's book "Life at the Bottom: The Worldview That Makes the Underclass". It is a fascinating read and one of the best books I have read in years.
http://www.amazon.com/exec/obidos/tg/detail/-/1566635055/qid=1114140635/sr=8-1/ref=pd_csp_1/102-0607526-7160156?v=glance&s=books&n=507846

Happiness may mean different things to different people, and it may mean different things to one person at different times in their life.

However there have been attempts at measuring such things as "Human Development" and indexing it so that one country can be compared to another.

At this page http://www.wttc.org/NU_compmon/compmon04/Social.htm there are different indexes available in spreadsheet form so that they can be sorted, but unfortunately the rates of tax of different countries are not directly included.

However in a number of areas of “Global Competitiveness”, Australia is not always near the top http://www.wttc.org/wttc/compmon/compmon.asp?compmonid=11

Mollydukes – Far from being new and complex, this type of thinking is as old as the hills and as dumb as dirt. Point out the merit of basing our tax system on the subjective and vague concept of “happiness”. Point out the merit in the idea that since rich people make us “unhappy”, we should do away with rich people. Where’s the merit in the thinking that taking away any hope or dream of attaining wealth is going to increase our happiness. This entire article is so ridiculous that I really am not convinced it isn’t a joke. Graham, is it?

Mollydukes instead of embracing every hair-brained, feel-good piece of tripe that’s foisted upon us, you should really apply some of your own advice and give it an impartial, critical once-over.

The top 25% of income earners in this country pay 65% of the personal income tax. How much more do you want? And to everyone who blathers on about the great big salaries paid out to CEO’s – companies aren’t democracies. Either buy shares in the company so you can have your say, or mind your own business.

I thoroughly agree with the sentiments expressed by bozzie, Terje and Aslan. In my view, this paper does not stand up to scrutiny as a serious exploration in the arena of economics and taxation policy.
What the authors do not consider is the classic Hayekian knowledge problem afflicting central planners. There is simply no way by which governments could adequately track levels, and changes thereof, of "happiness". This is especially the case because, as we all should recognise, happiness is a subjective, highly individualised phenomenon - the authors do not consider, in this context, classic microeconomic utility theory which states that one cannot compare interpersonal utility (as a proxy of happiness) due to its inherent subjectivity.
As an important aside, there are many instances where we cannot irrefutably know in advance what will satisfy us (notwithstanding our conjectures of what might do so). The decentralised market system assists in distilling fragmented, dispersed pieces of economic knowledge as to what might make us happy in a material sense. For instance, a producer selling goods and services in an open marketplace is effectively putting out a conjecture as to what they think might make consumers materially satisfied. Consumers respond by purchasing those goods/services which satisfy, and so bringing about a dynamic process ensuring material happiness.
On the other hand, for the reasons noted above, I seriously doubt the capacity of a central bureaucratic committee to facilitate happiness for individuals, including adjusting the taxation system to deliver greater happiness. Indeed, I would strongly argue that arbitrary progressive taxation is a recipe to promote material unhappiness, as well as fostering social discord.
May I suggest, Messrs Bagaric and McConvill, that you reconsider the economic implications of your argument. Friedrich Hayek, who produced famous economic, legal and philosophical texts, would be a perfect place to start.