Redistributive Effect And Progressivity Analysis Of Personal Income Tax To Adjust Income Distribution

China’s economic level continues to increase, while income gap remains high, which will become a significant risk of social stability and economic sustainable development. In this regard, government attaches great importance, studying and deploying the appropriate solutions to reduce the income gap. The tax as one tool to adjust income distribution narrows the income gap maybe within a certain range, the role of the personal income tax personal income gap is very important, which is conducive to achieving social equity. In recent years, function of personal income tax adjusting income distribution gap has become increasingly prominent, then studying the effect of progressivity and personal income redistribution is undoubtedly very important.This paper uses the income data from2002to2011, and mainly elaborates the regulation of personal income tax in three parts. The first part analyses the income gap between China’s urban residents, prior to the analysis, we must first understand our country’s income gap, and according to the source of income, income can be divided to wage income, business income, property income and transfer income, analyzing the contribution of all income gap in favor of efforts to master the personal income tax adjustment for each income. The pre-tax income Gini coefficient is mainly calculated to compare the income gap between different years, and the Gini coefficient of income sources in accordance with decomposition to obtain the income gap between the various revenue contribution. The second part calculates the index of personal income redistribution effect, and analyses whether the tax reform is to strengthen or weaken the redistributive effect, and studies the movements of the gap between personal revenue with the income tax and so on. Then decompose the difference of redistributive effect into progressive effect and the tax rate effect, and analyze the contribution of tax rates and progressivity to the redistributive effect, and whether tax reform is focused on the tax rate or progressivity. The third part uses four methods to calculate the income progressivity index, and calculates progressivity of wage income, operating income and property income, knowing progressive contribution rates of three income to analyze regulatory role of personal income tax on income distribution.The empirical results show that:the income gap in our country continues to expand, and property income gap is the largest one and the smallest is operating income gap, the income gap between urban residents in China’s main income comes from wages, and wage income share of the total income is the greatest. During2002and2005, the redistribution effect index showed a clear upward trend.2006,2008,2011was a turning point in the redistribution effect change, indicating that tax reform have weakened the redistributive effects of these three years. Changes in the redistribution effect is mainly determined by the average tax rate, and the progressivity is secondary, and average tax contribution is higher than progressivity effect. From the perspective of the average rate trends, during2002to2005,2006to2007,2007to2010, the average tax rate is rising, but at tax reform years it has declined. Measurement of progressivity index shows that:China’s personal income tax is progressive until2008, progressivity of operating income is negative, indicating that operating income in these years is regressive, progressivity of property income is also very small, because it is ratio tax. Contribution of Wage income tax progressivity in the total tax revenue is maximum, in2002to2011, the contribution rate of property tax revenue increases from year to year, basicly is widening, that is, during which property income tax increase to adjust income redistribution through progressive role in enhancing the index, on the whole, it is still dominated by wage income.The resulting revelate that:at present, China is leading to payroll taxes, but some high-income sources of revenue is not only in this, resulting in increased income disparity. Then reduce the tax burden of the working class, to strengthen the supervision of high-income groups is imminent. There are many drawbacks of tax classification, the use of classification combined with comprehensive tax system is a relatively benign operation and coordination in favor of the development of society. Our property income in taxation is not big enough, real estate income and some financial income are also the property income, which is now just hot industry. Because of the concentration of wealth in a few hands, you need to levy inheritance tax, real estate tax to alleviate this problem.