Part 1 - AL-Tax

International Taxation Handbooklevels – federal, state, and local – and since each state has a different tax structure,statistics will vary by state. New York was chosen to represent the USA, since it wasone of the statistics that Forbes included in its study. There were 56 jurisdictionsin the Forbes study. The top 28 countries are classified as having above averagehappiness.One interesting finding is that, of the 12 Asian economies in the study, sevenwere above average in terms of happiness (Hong Kong, Taiwan, Singapore, Japan,South Korea, Thailand, and China) and five were below average (Indonesia,Malaysia, Australia, Turkey, and India), which means there was a more or less evendistribution among Asian economies.Countries that have progressive tax structures make a conscious effort to take alarger portion of marginal income from the rich than from the poor and middle class.Whether they are successful in doing so depends on a variety of factors. Merelyhaving a graduated income tax does not automatically result in more taxes beingextracted from the rich. The effect of graduated tax rates may be reduced if exceptions,exclusions, and deductions creep into the system. The actual tax bite as oneclimbs the income ladder may be less dramatic than the graduated nature of the taxstructure suggests.One way to measure the actual tax bite is to look at the after-tax income taxpayersreceive as their income increases. The Happiness Index can be used to see what theactual relationship of income earned to income kept is as income levels increase.Table 11.5 gives the data for workers who are married with two children who earn€100,000 per year, for the same countries that were examined in Table 11.4.Table 11.5 shows that, of the 12 Asian economies in the study, seven were aboveaverage in terms of tax happiness at the €100,000 level, compared to only seven atthe €50,000 level, while only five were below average at the €100,000 level, comparedto five at the €50,000 level. In other words, the ratio of above average happiness tobelow average happiness remained the same as income increased from €50,000 to€100,000.One way to measure the degree of tax envy in a society is to see how much it takesfrom the rich. The more it takes from the rich compared to the poor, in percentageterms, the more envious the society is of the rich.Tax envy is a bad thing. Not only does it sew social discontent within the society,but it also dampens the incentive for the relatively rich people in the societyto produce and invest in the country. The reason Michael Caine became a US citizenis because he felt he was overtaxed by Prime Minister Harold Wilson’sadministration. Numerous celebrities, rock stars, and other high earners havechanged countries to avoid excessive taxation by their governments. Corporations276