The Income Effect And Consumption Effect Of Individual Income Tax Reform

The issue of income distribution is a major issue concerning the people’s livelihood.Narrowing the gap between the rich and the poor and improving the distribution pattern of national income are important means to achieve the two centenary goals.As China’s economy has shifted to a stage of high-quality development,it is all the more important to put people first and focus on addressing the issue of income distribution.The Party’s20 National Congress report pointed out that the distribution system should be improved.We will continue to give priority to distribution according to work and allow multiple modes of distribution to coexist.We will encourage more work to make people rich through hard work,promote equitable opportunities,increase the income of low-income groups,expand the middle-income group,standardize the order of income distribution,and standardize the mechanism for wealth accumulation.At present,our income gap is large,the gap between rich and poor is more obvious,and the issue of income distribution should be solved urgently.Moreover,the problem of income gap will cause the chain reaction of consumption and savings.The consumption demand has been flagging and insufficient consumption demand has constituted the important restriction factor of the sustainable and healthy development of our national economy.In addition,in addition to the dilemmas on the demand side,such as the widening income distribution gap of individual residents and the weak consumption power and willingness,our economy in the new period of rapid development is also faced with problems on the supply side,such as the decrease of labor supply population and the rise of labor costs.As an important policy tool to regulate income distribution,individual income tax should the important task of optimizing income distribution pattern and promoting social equity and justice in the reform practice.Therefore,it is of great value to evaluate and perfect the design of individual income tax system to improve the pattern of income distribution and stimulate the vitality of microeconomic subjects.Taking the individual income tax reform in 2011 as an example,this paper explores the specific effects of the individual tax reform on micro individuals’ income,labor supply and consumption.The individual income tax reform in 2011 is a major individual income tax reform measure different from the past.It not only increased the exemption amount of individual income tax,but also adjusted the tax rate and reduced various tax levels for the first time,which is of landmark significance for the individual income tax reform.Based on the panel data of China Household Tracking Survey(CFPS)from 2010 to 2018 and the strength difference method and panel quantile regression model,this paper comprehensively evaluates the impact of the implementation of the policy on individual economic effects.It is found that the income tax reform significantly improves the income level of middle-income groups,but has no significant effect on high-income groups.To some extent,it has improved the pattern of income distribution.However,the tax reform has not played a full role,which is directly reflected in its failure to effectively guide the economic behaviors of micro subjects.On the one hand,the tax reform has not effectively encouraged individuals to increase labor supply and has not significantly affected the working hours of individual workers,so the income increase effect is limited.On the other hand,the tax reform played an insignificant role in promoting household consumption,and the income increase achieved by the tax reform failed to further transform into household consumption and expand domestic demand space.Through subsequent tests,it was found that the main beneficiary of the tax reform--low-and middle-income families were more inclined to save the increased income.In addition,through the robustness test and heterogeneity analysis,the author also found that the individual tax reform policy affected the income of the salaried class.Therefore,individuals employed by enterprises or other organizations with regular wage and salary withholding units had more significant income effects than those without,and the income effects of individuals of different genders were not nearly the same.The income increase effect of men is stronger than that of women.In addition to the income difference between men and women,it is also related to the different elasticity of labor supply between men and women.The saving effect of households with different sizes is also different.Households with smaller sizes are more inclined to save,while households with larger populations are less likely to save.The findings of this study indicate that it is necessary to further think about the actual role of tax reform in realizing the adjustment of income distribution and fiscal functions,and explore ways to effectively increase consumption,expand domestic demand and improve labor supply,so that the government can more rationally design the next income redistribution policy and narrow the income gap of the residents.This is not only a task urgently needed to be completed,but also the function orientation and reform direction of Chinese individual income tax.As specifically mentioned in the report of the National Congress of the People’s Republic of China,we will strengthen the internal driving force and reliability of the domestic big cycle.However,a single tax policy cannot achieve this goal,because a single tax policy cannot solve systemic problems and must be implemented in coordination with other policies to achieve the expected effect.In order to achieve real results in adjusting individual income distribution,narrowing resident income gap,improving labor supply and effectively promoting consumption,in addition to the design of reasonable individual income tax,it is also necessary to combine expenditure policies,rely on the government to conduct reasonable public expenditure,and carry out comprehensive and reasonable design and implementation of the public policy system.We should rely more on the government to enhance its capacity for macro-control.The government should improve and innovate macro-control,give full play to the strategic guiding role of national macro-policies,and further coordinate the development mechanisms of fiscal,monetary,industrial and regional economic policies.