Income Distribution Effects Of Personal Income Tax Reform

In recent years,especially since the reform and opening-up policy, with thecontinuous development of our economy, residential income disparity has beenincreasing all the time and soon become one of the most important factors that affectour country’s social stability and economic development. Therefore, the governmentand the communities in society put forward some public policies and their reformaiming to adjust our residential income disparity to solve the income distributionproblems generated in the process of the economy development. However, the designand evaluation of public policies needs the support of macroeconomic modelsespecially in the study of personal income tax reform in 2011.In order to get areasonable、accurate and comprehensive research results,we introduce and developthe microsimulation models to study the income distribution effects of personalincome tax reform.The develop of the microsimulation models in China is relatively late because ofthe lack of micro data,and the current domestic research in this area is not very much.But in recent years, some scholars have begin to make some public policy evaluationthrough building and developing some microsimulation models . In this paper, wedeveloped two microsimulation models to study the income distribution effects ofpersonal income tax reform.First in the second chapter of this article, we develop a static arithmeticmicrosimulation model focused on the immediate income distribution effects of thepersonal income tax reform,it includes three main modules and they are micro dataprocessing module,policy implementation module and policy effects analysis module.Through the executiation in sequence of these modules, we can directly get the immediate income distribution effects of personal income tax reform and clearlyintroduce the role played by personal income tax reform on reducing governmentrevenue and income distribution adjustment.Then,in the third chapter of this article,we design a behavior microsimulationmodel considering micro individual’s behaviour to make analysis of the short-termincome distribution effects of personal income tax reform through the combination ofmicrosimulation and econometric analysis.Compared to the static arithmeticmicrosimulation model in second chapter,this model adds a behavioral responsemodule,and we select individual’s labour supply behavior as micro individual’sbehaviour reaction to personal income tax reform.During the research of individual’slabour supply behaviour,we start respectively from the depth dimension (workingtime ) and width dimensions ( labour force participation )of labour supply,and select aclassic binary choice model of labor force participation and continuous working timemodel.Through the combination of microsimulation and econometric analysis,thischapter implements on the micro behavior simulation, allowing us to get a moreaccurate and comprehensive analysis on short-term income distribution effects ofpersonal income tax reform.Through the introduction and application of microsimulation model, we simulatepersonal income tax reform and get the immediate and short-term income distributioneffects.The results show that, the personal income tax reform can not effectivelynarrowing the income gap of the residents but can alleviate some tax burden oflow-income groups and make the high-income groups bear more share of tax,so ourtax reform has some positive effects in fairness. In addition, in the short termindividual’s labour supply effect of personal income tax reform is not apparent andfor the use of static arithmetic microsimulation model and behavioral microsimulationmodel, the income distribution effects are identical basically.The results of this study will help us more clearly understand the income distribution effects of personal income tax reform and other related public policiesand they are also helpful when we make some new public policies on adjusting theincome distribution,advance labour supply and so on in later times.