Form a Reasonable and Orderly Pattern of Income Distribution

In November 2013, the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China adopted the “Decision of the Central Committee of the Communist Party of China on Several Major Issues of Comprehensively Deepening Reform” and put forward important guidance on income distribution issues. The main contents are: focus on the protection of labor income, strive to achieve the synchronization of labor remuneration growth and labor productivity increase, and increase the proportion of labor remuneration in the primary distribution; improve the wage determination and normal growth mechanism, improve the minimum wage and wage payment security system, and improve the collective bargaining system of enterprise wages. Reform the salary and allowance subsidy system of government agencies and institutions, improve the subsidy growth mechanism in difficult and remote areas. Improve the remuneration mechanism determined by the factors such as capital, knowledge, technology, and management. Expand investment and leasing services, optimize the return mechanism for listed companies’ investors and protect the legitimate rights and interests of investors, especially small and medium investors, and increase residents’ property income through multiple channels. The distribution pattern of national income refers to the distribution among government departments, enterprises and residents.

The income distribution process includes primary distribution and redistribution. Correspondingly, the income distribution pattern can also be divided into the primary distribution pattern and the redistribution pattern. From the perspective of the order of income distribution, the first is the initial distribution of income, that is, the distribution of production fruits among production factors. The distribution principle is based on the contribution of production factors to product production to reflect the principle of efficiency, forming the primary income distribution pattern. The second is the redistribution of income, that is, the adjustment of the primary distribution of income to ensure that low-income people or members of society who are incapable of working have the right to survive, which embodies the principle of fairness, forming a redistribution of income pattern. Since the initial distribution comes first and the redistribution comes later, the initial income distribution has a decisive effect on the redistribution. Since the Reform and Opening-up, our country’s distribution theory and distribution methods have undergone an evolution from a single distribution of performance-related pay to performance-related pay playing a leading role, supplemented by other distribution methods, and to a combination of performance-related pay and distribution according to production factors. Our country’s distribution pattern has changed from egalitarianism in the past to gradually widening income gap, and the Gini coefficient has risen. The widening of the income gap has its positive meaning, but the excessively wide income gap will lead to polarization and affect social stability. At present, our country regards the formation of a reasonable and orderly income distribution pattern as one of the goals of building a socialist harmonious society. Through effective macro-control, we can rationally adjust the distribution relationship and pattern of the whole society and narrow the income gap. In the practice of improving the income distribution structure and distribution methods, it is necessary to adhere to a system in which performance-related pay plays a leading role and multiple distribution methods coexist, combining performance-related pay and income distribution according to production factors, protecting legal income in accordance with the law, allowing and encouraging some people to get rich first through honest labor and legal operations, and allowing and encouraging production factors such as capital and technology to participate in income distribution. Suppress illegal income, and resolutely punish those who embezzle public property, use tax evasion, their positions or authority to further private interests or for financial gains and other illegal means to seek benefits. Rectify unreasonable income. Obtaining additional personal income by virtue of industry monopoly and certain special conditions must be rectified. Adjust excessively high income, improve the personal income tax system, and introduce new taxes such as inheritance tax. Standardize income distribution, make income gaps more reasonable, and prevent polarization.

The “Decision” requires the improvement of the redistribution adjustment mechanism with taxation, social security, and transfer payment to be the main means, and increase the intensity of tax adjustment. Establish a reasonable sharing mechanism of public resource transfer income. Improve the tax reduction and exemption system for charitable donations, and support charities to play an active role in helping the poor. The “Decision” also requires standardizing the order of income distribution, improving the income distribution control system and policy system, establishing personal income and property information systems, protecting legal income, regulating excessively high income, cleaning up and regulating hidden income, banning illegal income, and increasing the income of the low income population and increasing the proportion of middle-income earners to strive to narrow the income distribution gap between urban and rural areas, regions, and industries, and gradually form an olive-type distribution pattern.