Professional Interpretation

The United States adopts a comprehensive income tax system, which combines the standard deduction and sub-deduction for pre-tax deduction. The comprehensive income tax system refers to a system that combines the income of various sources from a taxpayer within a certain period of time (usually one year), minus the statutory reduction and exemption items and the amount of credit, and the income tax is calculated based on the progressive tax rate. The standard deduction refers to the method of deducting a certain high standard prescribed by law when the taxpayer's deduction items are below a certain amount.

The steps for calculating the personal income taxable income are:

(1) Calculate the adjusted amount (AGI): Adjust the amount of income = gross income - online deduction

(2) Calculating the taxable income: taxable income = adjusted income - offline deduction (standard deduction or sub-deduction + personal allowance)

(3) Calculating the amount of gross tax: gross tax amount = taxable income × applicable tax rate

(4) Calculating the tax payable: taxable amount = gross tax amount - tax credit amount

The offline deduction is mainly the deduction of the taxpayer's living expenses, which refers to the deductible amount calculated on the basis of the adjusted income, including the sum of one of the standard deductions or the deductions and the personal exemption.

The tax credit is an important tax measure implemented by the US federal government to eliminate poverty and protect people's livelihood.

The provisions for itemized deduction are mainly reflected in Articles 63 and 161 to 224 of the US Tax Code. They include (general) sub-item deduction and additional sub-item deduction, of which (ordinary) sub-item deduction In the main part, some taxpayers often apply to the project mainly in this part, including personal catastrophic losses, huge medical expenses, charitable donations, etc.

It can be seen from the above that the United States, as a developed market economy, has established a large, sound and scientific taxation system after 100 years of accumulation and development. However, due to various reasons, China's personal income tax system is still very imperfect, especially in the important function of regulating the income of the rich and the poor. Based on the experience of the United States, combined with China's specific national conditions, the following recommendations are proposed for the reform of China's personal income tax system.

First of all, in the overall tax system design, the tax system model with the current turnover tax as the main body shifts to the tax system model based on income. Since the reform and opening up, China's economic level has developed by leaps and bounds, and people's income has increased by a large margin. This has laid a good economic foundation for the transition to the income tax-based tax system in response to the trend of the development of tax models in various countries.

Secondly, change the current pattern of personal income tax classification and gradually transition to a comprehensive income model. Considering that China's current credit level and credit system are not perfect, and the status of tax collection and management and technology is not strong enough, we can first adopt the path of some classification items to the syndrome, and integrate the current 11 categories into three categories, namely, labor income, capital income and other income. First, the integration of labor income can include wages, salary income, labor compensation income and remuneration income. Capital income includes the income from the production and operation of individual industrial and commercial households, the contracted operation of enterprises and institutions, the income from renting operations, the income from royalties, interest, dividends, and property lease income. Other income includes income from the transfer of property, accidental income and other income determined by the financial department of the State Council. After the credit system is fully established, the accounting system is improved, and the collection and management technology is improved, the comprehensive mode of enrollment will be implemented as a whole.

Finally, the specific design of the income tax deduction system should be as comprehensive, precise and scientific as possible. As a direct tax, income tax has a huge impact on individuals, families and society as a whole. In China's current personal income tax deduction, only the tax exemption (disbursement amount), the standard deduction and sub-deduction of the US tax deduction are completely absent, reflecting the design flaws of China's tax law, and also the lack of attention to people's livelihood. To a large extent, it cannot reflect the principle of the ability to pay taxes, nor can it achieve the fairness of taxation and the humanitarian legislative objectives. Therefore, the reform and development of China's personal income tax cannot be separated from the larger expansion of personal deductions and the expansion of special protection scope. Projects that are closely related to people's livelihood, catastrophic losses, medical expenses (although they can be combined with insurance), and housing loan interest should be gradually added to the deduction. Precision requires that the overall framework of legislation is reasonable, coordinated with relevant fields, and convenient for specific operations. The science requires that the tax law be impartial in the two goals of raising the national finance and taxpayer's rights and creating enthusiasm for protection, and pay equal attention to the maximum efficiency of the income and wealth adjustment.