The Mechanism And Empirical Research Of Tax On Adjusting The Income Distribution GAP

Since reform and open policy, the socialist market economic system established and perfected gradually, both the total amount of our national economy and income level are increased rapidly. However, along with amount of encouraging achievements in our economy, income distribution gap has gradually expanded, and expand further. Although income inequality is the inevitable product of the market economy, and moderate income gap will help promote market competition, improve work incentives and economic efficiency, it will bring a series of negative consequences if income gap is too large, such as poverty, social unrest etc., thereby affecting the whole economy and society’s healthy and orderly development. In China, there are many reasons in why the income distribution gap is widening, not fully playing tax’s role on adjusting the income distribution gap is an important one.The article analysis the tax adjustment of income distribution gap theory firstly, interprets the adjustment basis and mechanism of tax on income distribution gap theoretically, and then by comparing several indicators which measuring income distribution gap, determining the application of Theil index to analyses the income distribution gap in Anhui province. On this basis, the vector auto regression model and the impulse response function were established between circulation tax, income tax, property tax and urban Theil index, regional Theil index, industrial Theil index, which aiming to narrowing the income distribution gap from tax perspective and investigating the effect of it in Anhui.The results indicate that the circulation tax has played a supporting role when the tax adjusts income distribution gap; the income tax has not played its major regulatory role because of the imperfect tax system; although the property tax’s regulatory role has reflected, it is not obvious due to its small scale. Therefore, combined with China’s national conditions and the development of tax system, the article put forward a series of recommendations which include optimizing tax model, perfecting income tax system, property tax system and circulation tax system, and improving tax collection system.