Nobody wants to pay more tax. But a recent study by Mercer seems to suggest that a higher tax rate does not serve as a deterrent to quality of life and, in some cases, is quite the opposite. Many of the cities which topped Mercer’s quality of life survey are those with relatively high tax rates.
The point of the study was to compare the quality of life in a range of cities across the globe to assist governments and major companies with international assignments. The study took into consideration such factors as political stability, available banking services, health and sanitation, schools and education, infrastructure, housing, and climate. Using New York as a base, each city was scored accordingly.
Using those criteria, Mercer determined that the best place to live in the world is… Vienna. Income tax rates in Vienna are as high as 50% and like the US, Austria believes in worldwide taxation.
What does a high tax rate buy you in Vienna? Lots of parks and green spaces. Efficient and relatively inexpensive transit. More than 100 museums and free open-air concerts in the summer. Social health insurance (apparently with freedom of choice for doctors and services). An extensive network of social services. Affordable housing.
In fact, despite relatively high tax rates (compared to the US), 13 of the top 20 cities touted as being the best places to live and work in the world are located in Europe. After Vienna, the list includes Munich (where my husband used to live), Zurich, Bern, Dusseldorf, Luxembourg, Amsterdam, Geneva, Copenhagen, Brussels, Frankfurt, Stockholm, and Berlin.
Just three North American cities cracked the top 20: Vancouver, Toronto, and Ottawa – all Canadian (darn those Canadians!).
The top US cities on the list were Honolulu (ranked 29) and San Francisco (ranked 30). New York came in at 49th with Washington (DC), Boston, Portland (OR), and Chicago faring better.
In Central and South America, San Juan, Puerto Rico (one of my favorite cities!) was ranked highest, with a 72. Port au Prince, Haiti (206) was ranked lowest, not surprisingly.
The Middle East and Africa suffered in the rankings, largely due to civil unrest and lack of infrastructure. Dubai managed to be ranked 77th, as its transit system has improved. Baghdad sits near the bottom of the rankings at 215th, though it scored better than last year; it’s infrastructure scored a 19.6 compared to the New York baseline of 100.
There were surprises for me on the list. In the Pacific Rim, Auckland (NZ) placed very high, ranking 4th. Sydney (AU) was next in the region with a ranking of 10. Asian cities were much lower on the list, with Singapore ranking 26th. Beijing experienced an “Olympic bump” to 113. Bangkok and Mumbai, not surprisingly, have dropped in the rankings.
Income tax rates in New Zealand remain relatively high, despite an emphasis on tax reform. Income tax rates have stabilized to about 39% for individuals (their pattern of increases and decreases is similar to that in the US) but have remained at 30% for corporations.
Does any of this matter? Our guts would say that high taxes would drive individuals and companies away. But the data doesn’t tend to bear that out. While it’s true that you’ll have the occasional Bono who runs to a tax haven to escape taxes, tax is usually one small part of the bigger picture to determine where to live and work. In fact, Slagin Parakatil, a Mercer rep, noted that taxes rarely affected the decisions of multinational companies in deciding where to deploy staff: “I don’t think tax would be an issue. If you need to send someone, you will definitely send someone, no matter whether the tax regime is high or not.”
I would tend to agree. Despite the hemming and hawing of companies over tax burdens, many cities – especially international cities – offer amenities (and yes, admit it, cachet) that far outweigh the cost of the tax. While I’ve had clients that have complained about tax burdens, including those in my own City of Philadelphia, few have found it the most compelling reason to move. I’ve often joked that major corporations that threaten to move out to the suburbs really don’t want to put on their letterhead, “London, Paris, Conshohocken” – I still find that to be true.
But please understand what I’m saying. I do think tax matters. I do think it’s important to be competitive when it comes to tax rates. I do think that a proper financial analysis should include a comprehensive review of tax schemes in regions where you want to do business. I just think that there are often intangibles – like not losing 10 hrs a week of your life in a car commuting to and from work – that should also be factored into the equation. Using a variety of factors (I think there were 29), Mercer made an effort to look at the bigger picture.
Did they get it right? I don’t know. I can’t imagine wanting to live in, say, DC over Philly. But I think they were on the right track.
I’ve been fortunate to live and work in some amazing places all over the world. There is something to be said for the quality of life. And sometimes (not always), it costs a bit.
What do you think? Is a higher quality of life worth a boost in taxes? And what constitutes a higher quality of life for you?
It goes w/o saying that the number of free services provided to people is directly proportional to the taxes levied on those people. In order to have all these things that this study deemed important, taxes must be relatively high. If what a government provides for “free” is a measure of how great a place is to live, then Europe is the obvious choice. If opportunity was added to the list, the US would crush western Europe, even w/o having all the entitlements US citizens enjoy today. No one can argue that if you want to live a mundane life, where your station is generally set at birth, where there is little opportunity to become great, where there is little desire for true freedom and the responsibility it requires, and an ever increasing demand for more entitlements, then Europe is your place.
I would like to invite all those in this country that feel that way now, to move to Europe. That way I can stop paying for the museum, zoo, and children science museum I don’t go to, the buses I don’t ride, and the welfare I don’t collect. Your ancestors didn’t come here for all that. They came here for freedom and opportunity.
Garagefather,
By your theory, I’m sure you don’t use our police system and the security it provides? And did you manage to avoid public school? If you have children, you should pay for their private education, otherwise you’re supporting socialism, right?
I agree that America has more opportunities for the highly ambitious than Europe might have, but this isn’t to say that Europe is a terrible place with no opportunities.
Hi,
I was living in the US for 4 years, were I worked with fake Id, I did all my taxes, and the question is…..
Can I get retired plan money back……I’m not living in the country
best regards. carlos
The only way that you could conceivably get a refund is to confess to committing a crime (fake ID + filing false returns). I think you’re better cutting your losses. But this is a question that’s bigger than me – if you need advice, I’d suggest you contact a lawyer who is familiar with your situation.
I lived in Germany for three years and never heard the Germans complain of their high tax rate because they knew they received plenty in return. So I agree totally with th article.
The most entrepeneurial fellow I ever met was a German that had worked for Siemens Electric and hated it so he went out on his own and had a list of over 125 jobs he had done to earn money including picking up gargbage at night from Businesses in a VW van with a raised top. He also moved students with this same beat up van and bought antiques in the countryside which I refinished and he sold in his antique shop on main street. He was amazing and the government did not keep him from prospering.
Why can’t americans see further than their own backyards. I found Europe to be alot less restrictive on my thoughts and political philosophy than the U.S. But then we do have the freedom to drive everywhere because there is no other option, and use up all the natural resources in the world and to work longer and harder for our money than anywhere on the planet and claim we are better off because we have a double wide and a plasma T.V. But do not talk about religeon of politics socially it is a taboo, amazing because in Europe you can talk openly anywhere about these topics have heated debates and not be made to feel unpatriotic or encounter angry, belligerant countrymen who can’t deal with self introspection.. One day maybe in another 500 years will Americans be able to discuss such topics at social gatherings.
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