Study On The Effect Of Special Additional Deduction Of Individual Income Tax On Adjusting Income Distribution

The obvious disparity in wealth distribution has become a principal limitation to our social and economic advancement.Therefore,how to reduce the disparity of income distribution of residents has become a problem that the government must solve urgently.Over the past several years,the government has reformed the tax policy and increased the transfer payments to reduce the income disparity and to correct the unbalanced income distribution.Individual income tax plays an important role in the government’s adjustment of residents’ income distribution,so it is meaningful to narrow the current gap between the rich and the poor and facilitate the implementation of common prosperity by enhancing the personal income tax system.The seventh reform of individual income tax in 2019 added special additional deductions,aiming to reduce the tax burden on residents,improve individual’s well-being and promote social welfare.As an important part of the current individual income tax system,it is essential to analyze the utility of special additional deduction in optimizing the pattern of revenue allocation.In order to examine the influence of personal income tax deduction on the adjustment of income distribution,this article reviews the following aspects by combining the quantitative and qualitative methods..Firstly,it compares the research literature and cites relevant concepts and theories to discuss how the special additional deduction plays a role in the process of adjusting income distribution when taxation is used to regulate income distribution.Secondly,we collate the relevant policies on special additional deduction in personal income tax and describe the current income distribution of residents according to different regions,income groups and industries.Furthermore,the Gini Coefficient,MT Index and Theil Index are selected as the indicators of measurement,and the sample information in the CFPS2018 micro-database is used to conduct an empirical analysis of the effect of special additional deduction in regulating income distribution.The adjustment effect of the special additional deduction is first measured as a whole,and then divided into different regions and different income groups for effect measurement.From the results of the empirical analysis,it can be seen that,on the whole,the execution of the special additional deduction policy has a negative impact on the fair distribution of income by taxation;from the perspective of different income groups,although the special additional deduction widens the income gap among the groups.it has a positive impact on the adjustment of income distribution within the group.Finally,based on the results of the empirical analysis,policy recommendations for optimizing the special additional deduction are proposed,such as widening the scope of comprehensive income,optimizing the policy implementation criteria and setting variable and differentiated deduction criteria.