Individual Welfare Effection Analysis Of Personal Income Tax

Since the reform and open-up policies of China,the residents' income is increasing with the continuous development of China's economy,,and the income gap is also widening.As a positive regulator,the personal income tax reform is also facing pressure for reform.In order to explain the impact of China's tax system on income inequality,the scholars have proposed many kinds of measure methods,most of which are based on the group index,such as Gini coefficient and MT index.Because the object of these indexes is the whole group,it can't reflect the the welfare changes of each individual.The relative impact to the individual welfare level of revenue changes should be the most important,therefore,we analysis the effect of tax on individual welfare from the viewpoint of individual,which contributes to a more comprehensive and accurate understanding of the direction of the reform of personal income tax.Based on relative deprivation theory,the relative deprivation curve and deprivation dominance were used as a new standard to judge income distribution,then the effect of individual income tax on individual welfare was investigated in theoretical and empirical research.In the theoretical part,we demonstrated that the distribution of post-tax income relative deprivation dominated pre-tax income distribution in a marginal progressive or linear tax system,which means the increasing of every individual's welfare.We also considered the sufficient and necessary conditions of this relative deprivation dominance relationship in a progressive tax,and the effects of the threshold and progressivity to the welfare of the individual.Further,the empirical analysis using Chinese Family Panel Studies 2012 data supported the theoretical results.After comparing the deprivation dominance relationship of the post-tax income distribution of 2008 and 2011,we suggested that the 2011 tax reform promoted the individual welfare of high income earners and reduced the individual welfare of low income earners in the sense of relative deprivation.And the simulation of the deprivation dominant relationship of income distributions were completed after the change of the threshold and progressivity.In the use of micro data to analyze the impact of individual income tax on individual welfare,the individual indicators is easier to reflect the changes in individual welfare than the group indicators,such as the Gene coefficient.This paper is divided into six chapters:Chapter 1 is the introduction.It mainly puts forward the research background and significance,and introduces the research contents and methods,and summarizes the innovation of this paper.Chapter 2 is literature review.In this part,the author summarized the research status of the tax redistribution effect,the relative deprivation theory and the ordering of income distribution.Chapter 3 is the theoretical analysis.Based on relative deprivation theory,the first part of the research was carried on the relationship between relative deprivation and individual welfare function,and it proved that the relative deprivation can be used as individual welfare function;the relationship between post-tax income distribution and pre-tax were analyzed,we demonstrated that the distribution of post-tax income relative deprivation dominated pre-tax income distribution in a marginal progressive or linear tax system,which means the increasing of every individual's welfare.and a detailed study on the effect of the threshold and progressivity on individual welfare,and it will provide the theoretical principle for the China's tax reform.Chapter 4 is the empirical analysis.Based on the analysis of CFPS data,we researched the relationship of post-tax income distribution and pre-tax under the tax system of 2008 and 2011,and simulated the result after the threshold increasing and progressivity changing on individual income relative deprivation.Chapter 5 is the main conclusions and policy recommendations.Based on the analysis of the relationship between relative deprivation theory and the individual welfare,it summarized the previous chapters,and put forward the corresponding policy recommendations for individual welfare improvements to promote China's tax reform,which enriches the existing research results.