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The Western Optimal tax theory regards the principle of tax fairness and tax efficiency as the support, under the strict assumptions, using the perspective of welfare economics, proposed the pioneering tax theory, the significance of this theory, mainly in tax design, the theory is that:the effective personal income tax in order to give full play to the function of regulating the distribution of income, the marginal tax rate of the low-income community should be 0, while high-income society’s marginal tax rate should also be 0; personal income tax rate should have a certain progressive. That is, for the low-income people in society, not only can not be taxed, but also to give certain government subsidies, and fully embodied the principle of tax fairness; for high-income earners in society, Mirrlees made a critical value, according to different countries’ situation to design different threshold value, below the critical use of a progressive system of income tax revenues, exceed the threshold for no tax, the purpose is to ensure tax efficiency, encourage high income earners to save or invest activities, increase social wealth.Under the optimal tax theory we have found that there are many drawbacks in the current personal income tax system in China, hindering the equitable distribution of the adjustment of income and increase revenue function, the first, the implementation of the wage and salary is 5%～45% excess progressive tax rates, tax levels and tax rates too high, too high a marginal tax rate affects the efficiency of economic activities of taxpayers; Second, China has adopted a classification of income tax model, tax evasion were brought to opportunity, to bring China’s fiscal revenue loss is not small; third, the tax base is too narrow and unreasonable expense deduction, it does not adequately reflect the taxpayers’tax situation, is not conducive to their personal income tax adjustment of income distribution function.On the basis of a careful analysis of the drawbacks of personal income tax, with the tool of optimal tax theory, put forward a sound policy recommendations of Personal Income Tax: First, the implementation of comprehensive income tax model; second, adjust the scope of personal income tax, such as the inclusion of some additional benefits; third, reduce the taxes’ grade, increase tax bracket, due to lower marginal tax rates.Each theory is not perfect, optimal tax theory, too, when we learn to be its essence, to its dregs. At the same time, it is under very strict assumptions to draw the conclusions of this theory to guide our country, with a personal income tax reform in China can not be applied mechanically, to in-depth analysis of the specific conditions on the basis of gradual expansion.
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