The Study On The Regulating Effect Of Personal Income Tax In China

Since the reform and opening-up, China’s economy has achieved rapid development, and residents’ living standards improved significantly, but the accompanying income distribution gap is getting worse. In order to ensure the stable development of China’s economy and society, the state and society are increasingly concerned about how to adjust the income distribution. Therefore, narrowing the income gap becomes an urgent problem of the government. The personal income tax, as one of the important state tax, bears the important task of regulating the income gap. By tax on residents’ income, the personal income tax can not only reduce the income gap between residents directly, but also raise funds for governmental transfer payment. Therefore, studying on the effect of the individual income tax on the residents’ income distribution gap is very necessary.This paper mainly studies our country’s personal income tax system of residents’ income distribution adjusting effect through the two aspects of theory and practice. First, this article calculates the pre-tax and after-tax income of urban residents in China, the Gini coefficient and the average tax rate of different income groups. And then sets up an econometric model to analyze the function of the personal income tax on urban residents’ income distribution gap adjustment. The study found that the adjusting effect of China’s personal income tax system in regulating income distribution is not significant. This is mainly due to the defects in the tax system mode, tax rate structure, expense deduction standards and tax collection and administration level of China’s personal income tax. To solve these problems, this paper puts forward a comprehensive and classified tax system with the combination of tax system mode, optimizing the tax rate structure, formulating reasonable expense deduction standard and improving the level of collection and management of specific policy proposals. Hoping that personal income tax system can play a greater role in narrowing the income gap and establishing a stable and harmonious socialist society in China.