Study On The Redistribution Effect Of Individual Income Tax In China

The income gap is one of the core issues concerned by the whole society in recent years. Individual income tax is recognized as a good tax by the international community and is also regarded as "the only tax regulating income distribution". The redistribution effect of income tax has been widely concerned by the public.Based on literature comparison and detailed overview, this paper first analyzes how individual income tax affects income gap from theoretical perspective. Then, with income data from National Bureau of Statistics and household income data projections from Wang Xiaolu group survey, it explains the real situation and main course of residents’income gap in China. Based on CHFS database, individual income tax reform in2011is analysized statically and dynamically through micro-simulation. We get these conclusions.First, Individual income tax, to some extent, could regulate the distribution of income, especially control high income holders. This regulatory effect might have been underestimated in the previous studies of for the bias of statistics. However, this underestimation could not fundamentally alter the weak comment on the regulatory effect of individual income tax. Second, after the reform of income tax in2011, the redistribution effect was undermined. But the adjustment of tax system improved income progressive tax. Meanwhile,the effect on larbor supply would not change this conclusion as the residents’labor supply in China is lack of flexibility. Individual income tax system is constrained by deficiencies and practical factors such as gray income. Individual income tax can not solve the widening income gap as a whole. Therefore, promoting the equalization of public service becomes a major method.Based on the above analysis and conclusions, the paper proposes the following policy suggestions:(1). Strengthening the management of high income holders (2). Appropriately simplifying income tax rate.(3).Deliberately reforming income tax system.(4).Making proper arrangement on income tax expenditure...