Study On The Effect Of Income Gap Between Urban Residents In Chinese Regional Regulation Of Personal Income Tax

Income distribution is one of the highest concerns in the current society. The party and the government have repeatedly stressed the necessity to accelerate our income distribution reform. With the steady and rapid economic development, urban residents’ income has experienced a huge increase in eastern, middle, western and northeastern regions of China. However, there is a new situation among these regions, that is, on the one hand, income of urban residents in the east region is much higher than that in the middle part, and the absolute difference between these regions is widening; on the other hand, the per capita income growth rate of urban residents in the western, central and northeastern regions is higher than that in eastern region, and the relative difference between the eastern regions and other three regions is gradually narrowing. In this article, through analyzing natural conditions, social development stages, capital accumulation, talent aggregation and national development strategy and industrial structure, I give a scientific, comprehensive and reasonable explanation for the two phenomena.Personal income tax has two functions:raising revenue and distributing income. Based on the reality that there is a huge gap among different regions in China, people expect that personal income tax can adjust revenue and narrow the income gap. The efficiency theory of regulating income distribution by individual income tax will be analyzed in this paper. By referring to the practice in European developed countries and Latin American developing countries, whether individual income tax can regulate income tax and the correlation between regulating effect and specific social condition and tax system will be concluded, which can provide experience and inspiration for individual income tax reformation in our country. By calculating and analyzing personal income tax burden of urban residents among different areas, the Gini coefficient before and after tax, the Gini coefficient sourced by income and the regional income of urban residents in the proportion of total revenue, I get a conclusion that personal income tax can play a certain role in decreasing income gap between urban and rural residents, but the effect is not that strong. Besides, among these regulatory effect, wage income functions best, followed by property income, while operating income indicates the worst and even the reverse regulation effect.Finally, according to the actual situation derived from the outcomes and lessons learned abroad, I suggest to narrow the income gap from the following five prospects, establishing a comprehensive income tax classification system, expanding the sources of tax, optimizing the rate structure, raising the proportion of wage income and strengthening social security and the Third distribution system, so that a more fair and reasonable income distribution pattern will be built and a more harmony and stable society will be promoted.