I can't seem to reproduce the issue. At King difficulty, the highest AI on turn 25 had 28 happiness, 8 from luxuries, 3 from discovery of natural wonders, and 17 base. With 5 unhappiness from cities/population that makes 23 net happiness.
You can use IGE to take the AI seat and mouseover the toolbar at the top of the screen to get a breakdown on their happiness. While I think that the 17 base happiness is excessive, the change was made when the barbarians were overrunning the AI and causing them to be unable to improve their resources.