Study On The Income Distribution Efects Of Personal Income Tax In China

Income distribution is related to livelihood, the income gap effects on the social harmony. Income tax can allocate revenues and regulate the gap of income effectively, but the actual adjustment is not obvious. In this paper, the distribution effect of income tax is studied, income tax issues are analyzed, and then we can put forward proposals to improve the income tax.By comparing the income situation, we can understand the income gap between residents. In order to analysis the distribution effects of income tax, we calculate the indicators and establish econometric models. In fact, the problem is serious, the income gap is huge between urban and rural areas, revenues level of the central and western regions is lower than the eastern and north-eastern regions, wage of tertiary industry is higher than the first industry. The tax burden of low-income earners is heavier than high-income earners, the pre-tax gini coefficient is not bigger than after tax gini coefficient, the distribution effect of income tax is not only weak, but also appears contrary regulation. The actual distribution of income tax is effected by the market system and income tax system, such as tax model, tax rate, deduction and so on. The distribution effect of income tax is related to the reform of income tax.First of all, the tax model should be comprehensive income tax system, unfortunately, domestic conditions do not permit. In the short term, we will have to accept the mix model, the income is divided into labor income and non-labor income, and we need to establish the final settlement system, at the end of every year. Second, labor income is suitable for withholding tax and the final settlement system, non-labor income is suitable for the fixed ratio. Third, the deduction should consider the family structure and basic living expenses, in case of the expenditure rising sharply, such as health care and housing prices, the deduction also should consider the regional income. Finally, in order to strengthen tax management, we need to improve technology, establish the self-reporting system and coding system, at the same time, we need to increase the punishment and raise the opportunity cost of illegal tax, it is better to create management agencies for collecting income tax.