Dani Rodrik has a blog on this theme. He reproduces this graph based on an analysis of Gallup data by a person called Angus Deaton:
Rodrik seems slightly surprised at the finding: that the poor are less happy then the well off. I'm not! It's tough being very poor. Tax justice is about making the poorest in the world better off.
What I'm not at all surprised about is the fact that the correlations begin to flat line at what are (in Western terms) perceived to be quite modest levels of income. Once material sufficiency is reached more material well being does not buy happiness.
It's a good argument for progressive taxation as redistribution from those with more than sufficient (and that's most in the West and those in the higher echelons of pay, everywhere) has quite clearly got the best chance of increasing the sum lot of human happiness.
What is the counter argument if well-being is our concern?