Research On The Progressivity Of Individual Income Tax

Individual income tax is the most effective tax adjustment towards income distribution, and its essential lies in the degree of progressivity. The progressive degree of individual income tax affects the adjustment results of income distribution. Since the Reform and Opening up started 30 years ago, the gap in income distribution is widening increasingly. The income gap is expanding gradually and the gap between rich and poor is increasing, which as is known to all, will bring about many bad results, including the inducements of economic growth, the continuous enlargement of the gap between the rich and the poor, the intensification of social contradictions, etc. These issues will not only give way to market ineffectiveness left unsolved to market economy, but also will turn out to be the intolerable pressure forced upon government. Thus, it has been widely recognized in the whole society that the great issue of such a wide income gap should be solved and strengthened as soon as possible. As an important method for government to adjust income distribution, the system of individual income tax should fulfill its own role.Based on the analysis and summarization of the previous study, the paper holds that the degree of progressive individual income taxation is effected by the following factors:the construction of taxation rate, deduction, tax exemption, tax incentives and tax loss. Based on the analysis of individual income tax systems in America and England, the paper argues that many aspects of taxation system design in both countries show the trend of the design of progressive system, which can be a good reference for China. Furthermore, from the perspective of the individual income reform within the whole world, the progressive degree of individual income is reduced. Although there are many factors contribute to this change, the two most important reasons are concluded as the intensive competition of the international taxation and the reduction of taxation burden for improving the efficience of taxation system.This paper deals with the influence of the modification of the Law on Personal Income Tax in June,2011 on the progressive degree of individual income tax in China, from the above results, the conclusion is that the progressive degree has been improved. In addition, the paper aims to analyze each factor of the presents progressive degree of individual tax in China, and the conclusion are that the presents progressive degree in China remains relative low level and the adjustment of income distribution has obvious limitations.Based on the above analysis, this paper, starting with the individual income tax system, based on the status of the too wide gap of income in China, put forward that basic guideline of individual income tax reform is to make full use of the reduction of income gap, and the income tax reform should conform to five principles, including the principle of fairness, the principle of combination with the level of tax collection and the citizens' consciousness of tax payment. This paper maintains that the progressive degree of individual income tax should be adjusted and the adjustment ability of individual income tax should be enhanced from the following aspects:implementing the module of classified complex income taxes, designing an effective construction of extra progressive tax rate that will fully reflect the distribution features of the citizens' income, implementing fee deduction and tax exemption featured by expense deduct standard and descending mechanism, enhancing the tax incentives for the low-income groups, improving the level of tax collection and the citizens' consciousness of tax payment.