About ***Tongfu and the three distributions - News media interview records (2021.8.19)

Question: On May 17, the 10th meeting of the Central Financial and Economic Commission proposed the need to study the issue of solidly promoting the common prosperity of society. Do you think such a meeting should be convened at this time to propose research and promotion of democracy? *What kind of signal does Tongfu send?

Jia Kang: It is obvious that the central government is emphasizing the guiding spirit of democracy and prosperity. The concept of "community and prosperity" is not a new concept. Deng Xiaoping has long emphasized that the essence of our socialism is "community and prosperity". This is one of the core concepts that has been inherited at the central decision-making level. In terms of guidance, the basic feature of the central government now is that its expressions are more systematic. A series of expressions are logically connected together, which means that we need to better understand the systematic thinking of the central government that now guides the entire modernization development. This is a systematic thinking. A new example of thinking. So many words, strung together are very organized and logical, and all the key points are reflected in these words. In fact, there was some preparation for this in the past - for example, the central government issued a document some time ago, confirming that Zhejiang should be used as a demonstration area for national prosperity, which also paved the way for this.

Question: Does this time have any special significance?

Jia Kang: Of course. Any guiding spirit given by the central government has a special meaning, that is to say, it refers to something under the "problem orientation" that the central government has specially emphasized. Among the main contradictions in our current society - the contradiction between the people's needs for a better life and unbalanced and inadequate development, the central government obviously attaches great importance to the issue. It seems that the per capita income indicator is still rising, and there is an obvious impact on income distribution. The problem of disparity cannot be ignored. This problem is mainly a structural one, which is also in line with the internal logic of the central government’s long-standing emphasis on supply-side structural reform as the main line of promoting a modern economic system.

Question: What are the main characteristics of the structural problem you mentioned?

Jia Kang: The so-called structural problem of income distribution is that we should not just look at the average indicator that per capita income is still rising, but we must pay special attention to the widening of the income gap. This has been discussed for a long time. Some people have said that It is said that there is such a characteristic as polarization. At least the income disparity cannot be denied, right?

Question: Yes.

Jia Kang: In terms of related social conflicts, the “ I heard that there was an internal directive specifically for the publicity department. The word " " cannot be used in these media under the guidance and supervision of the publicity department. This means that this issue cannot be ignored!

Q: Well, that’s right. In addition, we saw that in the article published by Xinhua News Agency this time, a third distribution of excessively high income will be carried out.

Jia Kang: The third distribution is a concept mentioned in this regard, and it is not just a third distribution to solve the problem of excessive income.

Question: First of all, how do you define excessive income?

Jia Kang: Yes, this requires specific policy design to determine some values ??that can be connected to actual management and control. What is "high" and what is "too high"? I gave an example in an interview with Time Weekly: In the past few years of personal income tax, there was a quantitative limit for those with an annual income of more than 120,000 yuan to self-declare. Isn’t the underlying logic that those with an annual income of more than 120,000 yuan need special treatment? So can we think that the concept of high income is above this line at that time? I think it can actually be understood that there is such a quantitative limit. After the personal income tax was reformed in 2018, it now has a comprehensive mechanism. The excess progressive tax rate adjustment accepted in the comprehensive mechanism is 3% at the beginning, which is relatively weak, and then increases to 10%-15% according to the income level. Later, it was observed that this 15% has become a limit that actually has a corrective meaning: the Guangdong-Hong Kong-Macao Greater Bay Area and Hainan are respectively for expert groups (Guangdong-Hong Kong-Macao is for foreigners, Hainan is for all experts, domestic and international Without distinction), 15% is regarded as a ceiling for special policies, so it has some symbolic meaning. At least 15% or more can be considered to be the income part that can be adjusted to a marginal tax rate of 45%, which belongs to High and too high parts. However, under special considerations, it must be noted that it does not mean that no one agrees with the excessive adjustment. It must be removed. What is called appropriate adjustment? Why did these two people have to quickly adjust after the reform in 2018? What about the local government’s special policy of capping the tax burden at 15%? There is something wrong here. Excessively high tax rates suppress the labor income and innovation enthusiasm of expert and intellectual groups. In fact, it forms tax discrimination against labor income, which is especially detrimental to high-tech companies stabilizing their expert teams.

Q: That’s right.

Jia Kang: These matters need to be discussed in detail.

The guiding spirit given by the central government is principled and ideological, or it also involves some key and essential content. When it comes to specific policy design, how to actually grasp it? This requires more thorough and detailed research, as well as a grasp of dynamic optimization in policy practice.

Question: We have also seen that this time it is also proposed to protect legitimate income in accordance with the law and reasonably adjust excessive income.

Jia Kang: I remember another saying in this regard - protecting property rights. This concept of "property rights" also includes intellectual property rights, which is included in it. This aspect mentioned is also very important.

Question: The most discussed point of reasonable adjustment of excessively high income is the so-called primary, secondary and tertiary distribution. What do you think is the specific implementation path for reasonable adjustment of excessively high income?

Jia Kang: The set of understandings involved in the three allocations is system theory, which cannot be explained clearly in a few sentences. I can only put it most briefly: From the perspective of primary distribution, where market regulation plays a more important role, my consistent view is that we should first ensure that there are incentives to make the cake bigger. On the premise of protecting property rights in this regard, more What is important is to maintain the fairness of the starting point, rules, and process. The so-called initial distribution should also focus on efficiency and fairness. This is a concept that has been emphasized in the past, but there are misunderstandings that need to be corrected. The fairness of rules and processes, including the "one starting line" type of starting point fairness, is not inconsistent with efficiency. There is no trade-off relationship here. How can we say "pay attention to both"? Government adjustment must also be included in the initial distribution, but the government's adjustment is mainly reflected in using turnover tax to raise the revenue needed for the government to perform its duties in a relatively equal (neutral) manner. In addition, the special consumption tax here has a certain adjustment effect, and Value-added tax, the largest tax among turnover taxes, places more emphasis on its neutrality. When it comes to secondary distribution (redistribution), the focus is to mobilize the enthusiasm of producers and operators for entrepreneurship and innovation under the premise of protecting property rights and encourage the expansion of the pie. After that, we must also pay attention to adjusting the average state of the results. At this time, the so-called " "The contradiction between efficiency and fairness" is actually the trade-off relationship between "efficiency" and "equity of results" that is dealt with in secondary distribution. That is, if the distribution results are too disparate due to various reasons, it will make the situation of disadvantaged groups worse. If the gap with the high-end is too large, it will bring about social disharmony. If the final distribution results are too unequal, then economic problems may become socialized or even politicized, which will threaten the overall stability. But here, if we go to the other extreme and make the results particularly equal, we will return to another bad state that we have already learned a lesson from in the past, that is, egalitarianism, or even eating from a big pot with the orientation of absolute egalitarianism. So, there is indeed a trade-off here. Here, the nature of the real contradiction is not "fairness and efficiency", but "appropriate equalization of results and efficiency", and there must be a trade-off between the two. And if this relationship is well balanced, it is not against efficiency, but it seems to have some callbacks in stimulating micro-entrepreneurial innovation enthusiasm, and in terms of overall macro comprehensive performance, it is to ensure a high level of comprehensive performance. It safeguards the fundamental interests and overall interests of all members of society. So when it comes to comprehensive performance, it is another concept that should be given positive recognition. My opinion is relatively straightforward: Our country’s ideological circles have not clarified the relevant concepts on this matter for many years. Therefore, the understanding has actually fallen into a state of "confusion". Everyone is talking about how to deal with the contradiction between fairness and efficiency. People have become accustomed to following what others say, and they are not sure about the real and substantive issues here. The false issues cover up the real issues.

Question: Can you summarize this substantive issue?

Jia Kang: Let me restate the substantive issue again: The main issue in the initial allocation is how to make the pie bigger. This includes fairness in rules, fairness in the process, fairness in the starting point of "one starting line", and efficiency. There is no contradiction, and there is no need to make any trade-offs. However, some appropriate structural adjustments such as consumption tax, which the government plays a role in, must be added. When it comes to secondary distribution, more attention must be paid to the government's role in equalizing the results and micro-benefits through redistribution. The question of forming a reasonable trade-off—to make this trade-off well is in line with the fundamental interests of all members of society and the overall overall performance. This is the true picture of the so-called "relationship between fairness and efficiency." We cannot generally talk about how fairness and efficiency are contradictory.

Question: I saw that you also made a suggestion when you were interviewed by Times Weekly. You should actively consider starting the legislation on real estate tax first and use this method to optimize distribution?

Jia Kang: This is an important policy tool in terms of redistribution. In the field of redistribution, to raise the low end, we mainly rely on transfer payments, social welfare, and basic social security; to move the high end down, we mainly rely on direct taxes.

Question: Is this real estate tax a very direct way to adjust the wealth of high-end high-income groups?

Jia Kang: Yes, because the tax burden cannot be passed on. So it is called direct tax.

Question: Can you further discuss the launch of real estate tax reform?

Jia Kang: The interview with Times Weekly touched on some key points. If you want to discuss this issue, there is not enough time today. You can search online for many of my papers and articles in this area. They are all written in several thousand words. Related issues are discussed in tens of thousands of words. If you have any special questions after reading, I can respond specifically.

Q: Okay. Let’s move on to the next question, because after the news about “the Communist Party of China and the Wealth” came out in the past two days, there have been many opinions discussed. Some people may be worried that there will be a “big pot rice” at the macroeconomic level in the future, including inhibiting entrepreneurs, including middle-income groups. There has been discussion about whether their enthusiasm for work and entrepreneurship will be affected. Do you have such worries?

Jia Kang: This has actually been included in our previous discussion. I said that we cannot think that talking about equality and prosperity can be understood as a return to the state of egalitarianism. The path of egalitarianism cannot lead to modernization. Our traditional system has already had many years of experience and lessons in this regard. Now it is indeed necessary to prevent "one tendency covering up another tendency". Saying that *** are all wealthy seems to be able to blame all these subjects who got rich first. It seems that they all have some serious problems, in terms of understanding. This creates undesirable confusion. If you get rich through your own honest work, hard work, creation and application of scientific research results, as well as your successful entrepreneurial behavior by seizing market opportunities and taking risks with courage and courage, you should still give strong support in general. We support and do not rule out appropriate redistribution adjustments, but if we understand this redistribution adjustment to mean that the distribution results are too equal, then we have gone to another wrong extreme. Therefore, this is a systems project guided by central systems theory thinking. In this system project, we have already mentioned the initial allocation and the secondary redistribution, and we also clearly mentioned the third allocation in the following center. This is also the same experience that all developed economies have and we need to learn from. In terms of the role of charity and volunteer organizations, China has seen more and more practical actions in society in recent years that are consistent with the development process and the process of "getting rich". But how to handle this matter well? , to guide well, we must not only learn from international experience, but also combine it with China's actual situation, and involve many related issues of system construction, policy optimization, and civilization cultivation.

Question: Now that the central government has proposed to regulate excessively high incomes, will it bring some pressure to these high-income groups or entrepreneurs?

Jia Kang: So we need to guide it correctly now. In terms of understanding, it is undeniable that there is a bit of pressure, especially when it comes to some things in China, where people are often not very rational at the moment. For example, some time ago, the country was rectifying high-tech enterprises, especially the leaders of "Internet +" entrepreneurship. Enterprises, some people say that these enterprises have "ten deadly sins" and wish to say that they are worthless. This slips into irrationality. The basic spirit of the central government is to enable their entrepreneurship to continue to develop healthily and sustainably with the efforts of rectification. This is the original intention of the central government, but it may be distorted when implemented in actual life. Now when talking about "the same wealth", we do not rule out the possibility of similar distortions. The "hate against the rich" that everyone talked about in the past few years can be clearly felt in society. If it is a general hatred of the rich, there must be something wrong. Here, corruption, bending the law, and ill-gotten gains must be criticized, punished, and put an end to them. This is completely necessary. However, if we say that all those who get rich need to be punished, this is a wrong step. It goes another way. A dangerous extreme has been reached. We should review Deng Xiaoping's golden saying: "Poverty is not socialism", so we need to get rich, and we should pay attention to the rules to allow us to actively guide the unbalanced process of getting rich towards universal prosperity.

Question: We also saw that the Central Committee of the Communist Party of China emphasized that universal prosperity means that the people's material and spiritual lives are both prosperous.

Jia Kang: This involves a lot of content. Wealth not only has relevant evidence to look at in terms of material indicators, but also has a sense of harmony, gain, and happiness. This time the central government made it very clear: both material and spiritual aspects should be included.

Question: So, this also corrects many people’s understanding of the so-called “wealth”.

Jia Kang: In terms of social science, this is in line with general knowledge, that is, human needs are divided into levels. After satisfying food and clothing, we must continue to pursue all-round development and enrichment. , Sublimation to the harmony of body and mind, and the enrichment of spiritual life in the ascent are indispensable contents. Adding this aspect, it will indeed be a comprehensive concept. This special guidance from the central government reflects this comprehensiveness.

Question: Next question, this meeting also proposed to open up circulation channels and create opportunities for more people to get rich. What do you think?

Jia Kang: This is very important. A major issue that has been discussed in recent years is why the channels and pathways for upward mobility in society seem to be getting narrower and narrower.

We don’t have to avoid some research results. For example, there are dissertations written strictly based on sociological surveys. In some county-level fields, the ascending channels formed by intertwined relationships are actually outlined as empirical cases. Let’s summarize this. This upward channel seems to be basically controlled by families in their early 20s.

Question: I have read relevant papers….

Jia Kang: How do the specific management departments and policy design departments understand this matter? There may be a lot worth discussing, but at least the issues reflected here show that it is a very complicated matter. How can this upward channel be better broadened?

Q: I would also like to ask you to talk about how we can expand the middle-income group. The middle-income group is actually the biggest cornerstone for the entire society to achieve universal prosperity and stability for the entire society. How do you think about the expansion in this area?

Question: I would like to ask a question about the third distribution, because this is the issue that people are generally most concerned about this time. According to the current information, the three distributions are voluntary and public welfare. It is not mandatory. Since this kind of adjustment is such an attribute, how can it ensure the effectiveness of distribution?

Jia Kang: Then you need guidance and encouragement. Guidance and incentive measures, in addition to some typical demonstrations, etc., from the perspective of our system construction, draw on international experience and must be coordinated with inheritance and gift taxes. Because standard public welfare foundations have exerted a great social influence in developed economies such as the United States, the system creates an inevitable "choice between two" for these rich people: in fact, the result of guidance is that they and If you are prepared to pay high inheritance and gift taxes after your death, it is better to independently design a public welfare goal and establish a standardized foundation during your lifetime. This can also reflect many personal preferences and follow the public welfare goal that you care about most. Define the purpose of the foundation. Establishing a foundation has a full set of legal guarantees - you can set up a particularly ambitious topic, such as promoting world peace, or you can set up very specific public welfare goals, such as supporting research on the treatment of lung cancer. As for the operating rules, it doesn't matter whether you name it after yourself, your parents, or your family. It's all fine. It will last forever. Under normal circumstances, when people do charity, they will receive personal income tax credits and discounts. These are some institutional promoting factors based on the voluntary principle.

Question: So what work does our country have to do to achieve such a goal?

Jia Kang: Our country’s system construction has just started in this regard, and some things can’t even be solved yet. For example, Mr. Wang Zhenyao himself tried the tax benefits for our charity donors a few years ago. He couldn't complete more than ten steps in almost half a year, so this is obviously not reasonable enough. There is also my country's inheritance and gift tax. Only the central government mentioned "research and launch" in the past few years, but in fact there is not much research progress. People tend to keep this matter secret and basically avoid it. This is the reality in China.

Q: Do you have any suggestions?

Jia Kang: When I made these comments, I actually made suggestions: what was mentioned in the interview with Time Weekly, what we mentioned today, and the suggestions followed in many places, is to hurry up and seize relevant Research and design of institutional mechanism optimization and policy optimization: The guiding spirit of the central government must be implemented, and all aspects of society must be encouraged to express their opinions and suggestions. Relevant management departments should brainstorm and form some operable work plans and essentials as soon as possible. You can’t just talk the talk, you have to be serious about it – many of the real things can only be done by overcoming difficulties in the deep-water area of ??reform.

Question: For example, in terms of specific operations, would you recommend introducing an inheritance tax?

Jia Kang: This is something under the concept of direct tax. This direct tax actually involves secondary distribution, and also affects and guides tertiary distribution, as we have discussed earlier. There are also transfer payments in secondary distribution. How can we do better? How can we improve the social security system? These are all involved.

Question: In addition to these aspects, what about our organizations and personnel related to charity?

Jia Kang: It is necessary to provide some necessary guidance and training. International experience can be used for reference, but it is also necessary to study, summarize and exchange some better experiences based on China's conditions, and intentionally promote some better experiences.

Question: There may be a problem where wealthy people want to donate money for three distributions, but there is no place or way to implement it.

Jia Kang: There are some ways, but maybe people still feel that their credibility is not high. For example, the Red Cross was originally an organization that accepted public welfare donations, but it was involved in the Guo Moumou incident a few years ago, and the result was a long time. The sequelae of internal negativity cannot be completely eliminated.

Question: Including the money donated for the Henan floods, there were also subsequent doubts.

Jia Kang: Some donations made after the last lockdown in Wuhan were criticized by people.

After the things were donated, the management was unclear and their use was delayed. After people were so active in transporting the things, there was a time when they said they were piled there and could not be processed and distributed in time, which was very sad. Institutional innovation must be closely integrated with management innovation and technological innovation.

Question: So after the central government proposed three allocations this time, there is still a huge workload and a long way to go.

Jia Kang: Yes, the entire process of achieving common prosperity is something that China has to deal with throughout the entire historical period of becoming a modern and powerful country. But it cannot be said that the "continuous tense" in the future is so long that we can do nothing now and just stop talking. The central government is now increasingly emphasizing the need to be serious. The essence of this spirit is very clear, and we must work hard to implement it.

Jia Kang: Contact me again, thank you!

Introduction to Jia Kang

Member of the 11th and 12th National Committee of the Chinese People's Political Consultative Conference, current distinguished expert of the National Committee of the Chinese People's Political Consultative Conference's Political Consultative Conference Talent Pool, President of the China New Supply-side Economics Research Institute, China Finance Researcher and doctoral supervisor of the Academy of Sciences. He once served as the director of the Institute of Fiscal Science of the Ministry of Finance for a long time. He is a specially appointed expert, consultant or advisory committee member of local governments in Beijing, Shanghai, Fujian, Anhui, Gansu, Guangxi, Tibet, etc. He is also a member of Peking University, Renmin University of China, National School of Administration, Central School of Socialism, Nankai University, Wuhan University, Xiamen University, etc. Distinguished professor in many universities. In 1988, he was selected for the Heinz Foundation project and worked as a visiting scholar at the University of Pittsburgh in the United States for one year. In 1995, he enjoyed special government subsidies from the State Council. In 1997, he was named a high-level academic leader of the National Hundred Thousand Talents Project. He has been invited by leading comrades of the party and state to discuss economic work many times. Served as one of the lecturers for the 18th collective study session of the Political Bureau of the CPC Central Committee on "Fiscal and Taxation System Reform" on January 8, 2010. Winner of Sun Yefang Economics Award, Huang Da-Mundell Economics Award and China Soft Science Award. Member of the National “Eleventh Five-Year Plan”, “Twelfth Five-Year Plan” and “Thirteenth Five-Year Plan” Planning Expert Committee, and member of the National Development and Reform Commission PPP Expert Database Expert Committee. In 2013, he edited "New Supply: Chinese Innovation in Economic Theory" and initiated the establishment of the "China New Supply Economics Research Institute" and the "50-person Forum on New Supply Economics" (serving as the first president and first secretary-general, the first Chief Economist during the second term of the Council). From 2015 to 2016, he co-authored with Su Jingchun and published "New Supply-side Economics", "Supply-Side Reform: A Concise Reader of New Supply" and "China's Barrier: How to Cross the "Middle Income" "Trap" (selected as "2016 Chinese Good Book" by the Chinese Book Critics Society and CCTV). "Ten Lectures on Supply-Side Reform" published in 2016 was rated as a national masterpiece by the Organization Department of the Central Committee of the Communist Party of China, the State Administration of Press, Publication, Radio, Film and Television and the National Library. Textbook. After 2017, he wrote and published many monographs such as "Theoretical Model and Practical Path of Supply-side Structural Reform", "Future Finance and Taxation on the Main Line of Supply-side Reform", and "General Theory of Finance". According to a statistical analysis of more than 7 million documents in 6,268 academic journals in my country's philosophy and sciences from 2006 to 2015 published by the "Chinese Social Science Assessment", Mr. Jia Kang's number of publications (398 articles), total citations (4,231 times) and total downloads Ranked first in frequency (204,115 times), with a comprehensive index of 3,429, ranking first by a wide margin. He is a representative scholar among the core authors of economics.