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Tax Change First Step to Equality

Updating the personal income tax system is a good first step in the drive to achieve wealth equality, says an article in Beijing Youth Daily. An excerpt follows:

The pending revision of the personal income tax code has attracted overwhelming public attention.

Income tax is an important means through which wealth is redistributed through society a way to promote financial equality.

The existing income tax system fails to effectively function in this way.

Numerous statistics show middle and low-income groups are the major contributors to income tax revenue, while high-earners contribute relatively little, a pattern that is contrary to intended result.

Raising the tax base is in the interests of those in middle and low-income brackets.

The draft amendment also seeks to address the problem of the perceived low rate of tax paid by high-earners.

If approved by the top legislature, the new income tax code, which proposes raising the tax base from 800 yuan (US$99) to 1,500 yuan (US$185) per month, is expected to alleviate the burden on low-income families, therefore improving their standard of living.

Income tax is a tool helpful to close the wealth gap. But simply raising the tax base will not inevitably narrow the gap. It is not a panacea that will achieve social equality.

Many social problems affect wealth distribution, such as urban-rural differences, inequality in the healthcare system, education and housing.

Education and medical expenses, in particular, have always been a huge burden on low-income families.

Skyrocketing property prices have thrown many average wage earners into heavy debt.

If these problems are not addressed properly, social wealth equality will be hard to achieve. Revising the income tax code is only a small step towards that goal, but it is a good start.

(China Daily August 25, 2005)

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