Understanding Finance from scratch

Chapter 20 Who will protect the "money" and pay attention to the "invisible hand" - learn some financial supervision and regulation knowledge every day (2)
In the 1980 presidential campaign, Reagan took the "Laffer Curve" theory proposed by Laffer as one of the important theories of the "Reagan Economic Recovery Plan", and proposed a set of tax reduction and government spending reduction as the main content. economic program.After Reagan came to power, the extent of his tax cuts was really rare in the history of the United States, and the economic growth also showed a boom that was rare at that time. It can be said that the "Laffer Curve" theory has made a lot of contributions.

But the Laffer curve also has many problems. For example, from a theoretical point of view, the Laffer curve lacks the integrity of the system. It is only a countermeasure to solve "stagflation". It has certain limitations, mainly in the following points :
First, the establishment of the Laffer curve must meet certain prerequisites.Five conditions must be met: "private ownership of production relations and market system, a closed economic background, the budget distribution effect of national income is lower than the distribution effect of enterprises and private individuals, savings are converted into investment, and there is no tax burden shifting." We can sum it up There are two points: a perfectly competitive market system and a closed economic environment.However, neither of these two prerequisites exists in the real economy.A perfectly competitive market is an ideal market system that is hard to find in real life.Under the conditions of an open economy, it is the capital factor, not the labor force, that is easier to move freely internationally.Capital is inherently chasing surplus value. Investors will choose countries and regions with low tax rates. Low tax rates will bring substantial growth in employment and tax revenue to capital-importing countries and regions.The "comparative advantage" of the low tax rate of capital makes the functional relationship between tax rate and tax revenue in an open economy appear as a monotonically decreasing curve.However, the labor force is affected by various factors such as national policies, cultural environment, and historical background, making it difficult to move internationally.At this point, the Laffer curve can only provide a theoretical basis for reducing corporate income tax at most, but cannot provide a theoretical basis for reducing personal income tax.

Second, the Laffer curve describes the impact of tax rates on taxation and the economy under long-term economic conditions.In the short term, various policies have a certain "time lag" from formulation to implementation to results.It is this "time-lag effect" that makes the short-term tax rate and tax function a monotonically increasing curve.

Third, the Laffer curve ignores the class analysis method, only pays attention to the relationship between income and taxation, and ignores the people of different income classes behind the income, and simply abstracts people of different incomes into "people".Progressive tax is divided into two types: excess progressive tax and full progressive tax. Countries generally adopt excess progressive income tax.Progressive taxation means that the more income, the greater the proportion of taxation.Low-income earners do not bear high tax rates and thus do not suffer from high progressive tax rates.What really bears the high tax rate is only the extra high part of the income of the high-income earners, so the high tax rate only has a greater side effect on this part of the income.

Fourth, the Laffer curve view of work is utilitarian and cannot fully explain why people work hard.There are three possible results of high progressive tax rate affecting work: one is that some high-income earners would rather have more leisure than more work as predicted by the Laffer curve; the other is that some people will work harder so that Make more money to make up for lost taxes.

Fifth, the Laffer curve regards all personal income as labor income and ignores non-labor income.According to the Laffer curve theory, the higher the marginal tax rate, the lower the cost of leisure, so absenteeism increases, overtime decreases, and the time people spend on improving their skills is relatively reduced. Therefore, a high marginal tax rate hinders people's work enthusiasm and labor productivity. decline. "A reasonable tax rate should not only obtain fiscal revenue, but also stimulate production, so it is not easy to be too high. This is why Western countries often use tax reduction policies after the 20s." This argument seems to be justified, but personally Income is divided into labor income and non-labor income, and taxation objects are different, and tax rates have different effects on labor supply.With the gradual increase of the personal income tax rate, rational people will increase their income by increasing their working hours until they reach the working limit; then, they will increase their leisure time and reduce their working hours, and their personal income will also decrease accordingly.Therefore, light taxation on labor income and heavy taxation on non-labor income will help encourage workers' enthusiasm for work.

Deposit reserve as the leading role in regulation
The bank (bank) originated from the bench (bench).At first, it was just currency exchange, and later added new business, keeping gold and silver for rich people. Others put gold and silver in his safe, and it issued a receipt for people and charged a certain storage fee.Over time, some wise people saw the way. Although people deposit and withdraw every day, some gold and silver are always idle in their safes, and the safes are rarely emptied.So the money changers played the trick of "borrowing chickens to lay eggs". Every time someone deposits a sum of money, they only keep a part of it in their hands, and lend the rest.That part of the gold and silver retained by the money changer was later the deposit reserve.

Do you understand the significance of deposit reserves as a means of regulation?

We often hear deposit reserves mentioned in economic news, so what does deposit reserve do?Financial institutions must deposit part of their deposits in the central bank, and this part of the deposit is called the deposit reserve; the ratio of the deposit reserve to the total deposits of the financial institution is called the deposit reserve ratio.For example, if the deposit reserve ratio is 7%, it means that for every 100 million yuan of deposits that financial institutions take in, they have to deposit 7 yuan in deposit reserves with the central bank, and the funds used to issue loans are 93 yuan.If the deposit reserve ratio is raised to 7.5%, the loanable funds of financial institutions will be reduced to 92.5 yuan.

The reserve fund was originally intended to guarantee payment, but it brought an unexpected "by-product", that is, it gave commercial banks the function of creating money, and eventually became an important tool of the central bank's monetary policy.The financial system has evolved to this day, and the original "by-product" has become a "fist product" and has risen to a major position.The role of reserve guarantee payment is not so obvious, because with the development of the financial market, commercial banks have more and more financing channels, and they are not as overly dependent on reserves as they were in the early days to cope with customer withdrawals.

Under the deposit reserve system, financial institutions cannot use all the deposits they absorb to issue loans, but must retain certain funds, namely deposit reserves, in case customers need to withdraw funds. Therefore, the deposit reserve system is conducive to ensuring that financial institutions Customer's normal payment.To put it simply, each bank needs to hand over a part of the deposit to the People's Bank of China to guarantee the withdrawal of residents in the future, and if the deposit is more than before, the funds that the bank can use for its own external loans will be reduced. up.

With the development of the financial system, the deposit reserve has gradually evolved into an important monetary policy tool.When the central bank lowers the deposit reserve ratio, the funds that financial institutions can use for loans increase, and the total amount of loans and money supply in the society also increases accordingly; conversely, the total amount of loans and money supply in the society will decrease accordingly.

The central bank's decision to raise the deposit reserve ratio is a macro-control of monetary policy aimed at preventing excessive growth of money and credit.Since the beginning of this year, my country's economy has grown rapidly, but the outstanding contradictions in economic operation have become more prominent, and the momentum of excessive investment growth has not diminished.One of the main reasons for the excessive growth of investment is the excessive growth of money and credit.Raising the deposit reserve ratio can correspondingly slow down the growth of money and credit, and maintain the sustained, rapid, coordinated and healthy development of the national economy.Generally speaking, the monetary tool of deposit reserve ratio is considered to be a relatively violent monetary policy tool.

So what impact will raising the deposit reserve requirement have on China's economy?

The first is the bank.The reduction in deposit reserves will reduce loan profits, which will have a certain impact on the performance of banks that still rely on deposit and loan spreads as their main source of profit; on the other hand, it will urge banks to follow up with other profit sources, such as retail business , international business, intermediary business, etc., which will further strengthen the stability and profitability of the bank.

The second is business.Due to the shortage of funds, banks will be more cautious in choosing loan recipients, preferring large-scale, strong profitability, and low-risk large enterprises. This will have a certain impact on the financing capabilities of some large enterprises that rely heavily on bank loans and many small and medium-sized enterprises.The strong are stronger.

Finally, there is the stock market.The impact of the increase in the deposit reserve ratio on the stock market is very limited, and the range is lower than expected. Moreover, as far as the funds of most banks are still relatively sufficient, this ratio has a very limited impact on their loan business capabilities; on the other hand, the market is very The tightening policy of the People's Bank of China has long been expected, so the stock market has digested it in the early stage, and it is only reflected in the moment when the news is released.

Personal Income Tax: Income Distribution Adjuster
This is a piece of news from Fujian Province: In 2009, nearly 6 taxpayers with an annual income of more than 12 yuan in Fujian Province made a self-declaration of personal income tax, and a total of 207.64 billion yuan in annual income was declared.Among them, nearly 2 people declared property income.Specifically, 14840 people declared income from interest, dividends, and bonuses, and 5113 people declared income from property transfers and leases. Their total declared annual income was nearly 88 billion yuan, and their per capita property income was nearly 44 yuan.Thanks to the personal income tax policy on personal income from the transfer of restricted shares of listed companies, the net increase of individual tax on restricted shares in Fujian Province in the first quarter was 8278 million yuan.Affected by this, the province's personal income tax on property transfer income increased by 270.5%.

The topic of the news is personal income tax, so how is personal income tax implemented in our country?

Personal income tax is a tax levied on the taxable income obtained by individuals (natural persons).As an important tax that directly participates in the distribution of personal income, personal income tax was first created in the United Kingdom in 1799. It is now a tax that is generally levied by countries all over the world, and has become the most important tax source for some countries, especially Western developed countries.Moreover, with the improvement of productivity and the continuous improvement of the personal income tax system, the proportion of personal income tax revenue in tax revenue has also increased rapidly. In many countries, especially developed countries, it has established the status of the main tax category and has become the main source of fiscal revenue.

Because it not only has the function of organizing fiscal revenue, but also undertakes the functions of redistributing national income, narrowing the gap in social income distribution, and alleviating social contradictions, so it has a status and role that other types of taxes cannot replace.Therefore, personal income tax is widely regarded as the most fair "good tax" among various taxes, and is favored by governments of all countries.

The United States is a very mature country in the collection of personal income tax.Americans have a saying: "There are two things you can't escape in this world: one is death, and the other is paying taxes." The most important part of the whole tax.In recent years, about 43% of the total US federal fiscal revenue comes from personal income tax on average, while corporate income tax only accounts for 7%.Therefore, from the President of the United States to the common people, paying taxes has become everyone's obligation and responsibility.According to statistics, about 40% of all personal income in the United States is handed over to the tax bureau.

In the United States, except for children, nearly every adult resident pays personal income tax.According to the tax law, as long as you are a U.S. citizen or a green card holder, the U.S. government will tax your income; even if you do not live in the U.S. after taking the green card, you must pay personal taxes to the U.S. for your overseas income. income tax.According to the statistics of the US Internal Revenue Service, in 2005, about 1.83 million Americans reported their personal income tax for 2004. Based on the population of about 2.9 million in the United States, about 2/3 of Americans have to pay personal income tax.

The fairness principle of the US tax law can also be seen from the proportion of high-income taxpayers.Although almost every adult in the United States has to pay taxes, the taxes paid by groups with an annual income of more than 10 US dollars account for more than 60% of the total personal income tax, which is the most important source of tax revenue in the United States.In other words, the huge fiscal revenue of the U.S. government is mainly paid by the wealthy, who account for a minority of the population, rather than the ordinary working class, who account for the vast majority of the total number of taxpayers.

More than 50% of my country's personal income tax comes from ordinary wage earners, which is far from the "20-80 law" in economics (that is, generally speaking, [-]% of the rich should pay [-]% of personal income tax).Therefore, how to improve the pertinence of the personal tax supervision of high-income earners has always been a difficult problem faced by my country's tax authorities.Any individual who has a domicile in China, or has no domicile but has lived in China for one year, and obtains income from inside and outside China, as well as an individual who has no domicile and does not live in China or has no domicile but has lived in China for less than one year Individuals who obtain income from China are taxpayers of individual income tax.

From the perspective of the direction and requirements of the reform of the income distribution system, it should be the goal and direction of the reform to substantially increase the proportion of residents in the national income and to allow ordinary people to eat more "cake".Therefore, regardless of the status quo of fiscal revenue and the direction of income distribution reform, China is required to implement a policy of tax cuts and concessions for the public in terms of taxation.

How is my country's personal income tax collected?

9. For income from wages and salaries, 45 levels of excess progressive tax rates are applicable, and taxes are calculated and levied on the basis of monthly taxable income.The tax rate is divided into levels according to the taxable income of personal monthly wages and salaries. The highest level is 5%, and the lowest level is 9%. There are [-] levels in total.

5. Five levels of progressive tax rates are applicable.The production and operation income of individual industrial and commercial households and the annual taxable income of contracted and leased operations of enterprises and institutions applicable to annual calculation and monthly prepayment of taxes are divided into grades. The lowest grade is 5%, and the highest grade is 35%. Level 5 is [-]%, a total of [-] levels.

(End of this chapter)