Yao Yang on common prosperity: property taxes can be levied, but inheritance taxes are not necessary

Original title: Yao Yang on common prosperity: property taxes can be levied, but inheritance taxes are not necessary, because they do not fit well with our culture

Interview: Fu Bihan, Song Yue (Intern)

The circle of economists recently held a dialogue with Yao Yang, dean of the National Development Research Institute of Peking University, on issues such as common prosperity, and the following is the full text of the interview.

Circle of Economists: What do you think of common prosperity?

Yao Yang: "Common prosperity" is not a very new term, perhaps everyone has not noticed, when the leaders made the 14th Five-Year Plan explanation at the Fifth Plenary Session of the 19th Central Committee, they have already mentioned common prosperity, and it may also be that the 14th Five-Year Plan has more content, so everyone has not noticed. On August 17, the tenth meeting of the Central Financial and Economic Committee came to hold this meeting, which has some different meanings, that is, it involves the problem of how to implement it.

China's gap between rich and poor has been rising until at least 2010. At that time, the Gini coefficient was about 0.49 according to the National Bureau of Statistics, and the data of our Peking University China Family Tracking Survey was 0.52 in 2010, and this gap was mainly due to the fact that the statistics bureau did not survey the top 1% of the people, nor did it investigate enough of the lowest 10% of the income. So it's a sample of chopping off the head and tail. Our sample was of poorer people, so our Gini coefficient was higher. But since then the Gini coefficient has been declining, it has fluctuated slightly over the past few years, and now it may be 0.47 to 0.48, so the income distribution is still very uneven.

On the other hand, the distribution of wealth is also unbalanced. The National Bureau of Statistics gives data that 10 per cent of the population owns more than 40 per cent of the wealth. But our survey is that 10 percent of people own 70 percent of the nation's wealth. I think there may be some statistical methods that are different, because we calculate, such as the current price of real estate, which widens the wealth gap. Because housing prices in first-tier cities are very high, so the highest income of 10% of the people is actually in first-tier cities, so the wealth is also more, and many rural residents' real estate is basically worthless.

Our statistics show that the highest 10 percent earn about 85 times the income of the lowest 10 percent, while the bottom 10 percent earn only 0.5 percent of our total income.

In the past, we mainly engaged in GDP, we put GDP up, and then we wanted to eliminate absolute poverty, but the relative poverty gap was still very large. Deng Xiaoping proposed to let some people get rich first, and now that this goal has been achieved, it is natural to achieve common prosperity.

However, it should be noted that in essence, income and wealth are both results, and the fundamental reason is that the gap in income capacity is very large. Now if you want to enter a rich family or the middle class, if you don't have a good education, it's almost impossible, because labor-intensive jobs are basically gone.

So education comes first, but the gap in our education is enormous. Here are a few data, the first is the average level of education in rural areas, the average level of education of young people is just over 9 years, which is also a recent thing, that is to say, they have just graduated from junior high school, which means that there are still some people who have not graduated from junior high school. There is actually no 12-year education in the cities, but it is better than in the countryside. The level of education in big cities is higher, and universities have entered the popularization stage.

On the other hand, we see that intergenerational mobility declines very quickly, and we generally use the correlation coefficient between my own education level and my father's education level, and the higher the correlation coefficient, the worse the social mobility. Using our Peking University data, a person born in the 30s has a correlation coefficient between his education level and his parents' education level at about 0.6 and 0.7, and then it begins to decline. People born in the 50s had dropped to the lowest level of 0.35, basically reached the level of the developed countries, and then started to rise again, and now it was 0.5, 0.6, that is, in fifty or sixty years he went back. Let's look closely at that data. About 8 per cent of those born in 1985 still have not completed primary education, and they are now in their 30s, but 8 per cent are semi-illiterate. So in this case, it is conceivable that his income gap will widen, because your education gap is so big. This is the general situation of the gap between the rich and the poor in our country.

Circle of Economists: What standard do you think our country should meet in order to achieve basic common prosperity in the world?

Yao Yang: Look at the high standard or low standard, if it is a high standard, like Taiwan and South Korea, their Gini coefficient is 0.35. It is very difficult for us in the mainland to meet this standard, but can we now set our goal between 0.4 and 0.45, or lower, for example, between 0.4 and 0.42?

Circle of Economists: How do you understand the three-fold distribution?

Yao Yang: I estimate that there will be some policies to encourage everyone to donate, such as setting up a trust fund, and then doing charity, which may be encouraged, because our country can't do this now, and there may be policies in the future, there will be legal documents that allow everyone to do this, and promote a lot of people to donate.

Our country now has a relatively high tax rate, corporate income tax is as high as 25%, if the business owner takes out this profit, he still has to pay personal income tax, the highest tax rate is 45%, so many people do not take it out. Don't look at his own assets are large, in fact, the part they can enjoy is relatively small. So we saw the last round of deleveraging, some companies died. You'll find that he's going to have some real "losers" because all his assets are in the business and he's gone poor overnight. And this is quite common, if we allow for example to set up a trust fund, then the trust fund uses it to do some charity, does not collect his tax, and will encourage many people to do charity.

But there is a point I think in various WeChat groups and self-media, the interpretation is wrong, I think that the third distribution to force everyone to donate, especially some companies, immediately take the lead in donating how many hundreds of millions, I feel that it is forced to donate more meaning.

But it should be seen that compared with the United States, the proportion of donations from Chinese entrepreneurs to all donations is much higher than that of the United States, and most of the donations in the United States come from ordinary people, who donate a lot of money. Many of their think tanks are donated by ordinary people, giving a Memoryship every year, and then how much money you give in a year. They think I believe in you, so I want to support you, I am willing to donate, donate 500 or 1000 US dollars a year, but the accumulation is more, and more people will donate. Therefore, the United States donates a lot, not mainly because people like Buffett are donating, but ordinary people are donating.

I don't think we're going to assign three assignments, not to target all of our entrepreneurs, not to say, "I'm sorry, you have a problem if you don't donate." Some people even say that it is now a stage where we are going to socialize assets again, and these interpretations are completely wrong.

The original intention of this meeting was to study some policies and then encourage people to make charitable donations.

I think property taxes must be levied, because the land in various places is slowly sold out, and the property tax can become a source of funds for it. Taxing property will not affect everyone's motivation to work, because this is a purely consumer asset. Of course, the collection of real estate tax will not affect the ordinary people, he will have a tax exemption, so the general people do not have to worry, for example, my family of three has a 90 square meters, 100 square meters of house, I estimate that basically do not have to pay taxes or pay very little tax, so there is still an income adjustment effect.

But be careful about levying inheritance taxes, because inheritance taxes don't quite fit into Chinese culture. Because in our culture, it is produced as a family unit, and the relationship between son and Lao Tzu is sometimes unclear. For example, if the father wants to give the property to the son, the son still has to pay the tax, but the son says that it is not right to pay the tax, because I also contribute. Maybe his father hadn't given him shares before. So the inheritance tax doesn't quite fit in with our family-based culture.

Besides, many of us buy houses, that is, to buy for our children, and you suddenly say that you still have to pay taxes for children's houses, and they can't afford to pay them. The house in the first-tier city is often 5 million, tens of millions, how much do you pay the inheritance tax? Let's say 20%? There is no point in collecting it low, and the 5 million house will have to pay 1 million. A young man has nothing, he inherits a house, first pay 1 million, where does he have money?

This problem arises in the United States, that is, to give the next generation of houses, and then he can't inherit them, the child says, "I don't have any money, can I sell the house first", the government says no, you must first transfer to your name, you have to pay taxes first, and you can only sell after paying taxes. So you have to borrow money to pay the tax first, and then you sell the house, which obviously makes no sense in China, and there is no need to levy inheritance tax.

Many countries find that inheritance taxes are ultimately not collected. In the end, the people had all kinds of loopholes to exploit, and in the end the government did not levy much.

Circle of Economists: What else can be done to achieve common prosperity?

Yao Yang: The most fundamental way to achieve common prosperity is to improve the productive capacity of all the people, that is, to teach people to fish or to teach people to fish, that is, whether you give him fishing gear or directly give him fish.

Obviously Chinese attaches great importance to education, but in the current fierce competition situation, such as the emergence of "chicken babies", there is actually a differentiation, that is, middle-class and above families invest more and more in children, but the poor invest in decreasing. We're talking about "lying flat", but now maybe the bottom 50% of the people who earn the income have already been lying flat, they don't have chicken babies at all, you go to the countryside to see how many chicken babies are in, give children cram schools and so on. It wasn't that they didn't want to, it was that he didn't have that ability. So the gap widened.

Of course, there are other measures to achieve common prosperity, and I think the most important thing is to improve the education of the children of our lowest-income families, but our investment in this area is far from enough.

We are now very concentrated in educational resources, and recently I listened to a paper that said that the more public education is invested, the greater the gap in education. The author found that most of our public education resources are invested in schools, and if we look closely at schools, the investment is also concentrated in a few so-called high-quality schools.

When you go to a city or a province, he invests money in good schools, and good schools get better and better, and bad schools get worse and worse. Everyone understands who goes to a bad school and who goes to a good school, but this is a big problem. So Beijing now has to rotate teachers, you stay in one school for three years, and then you stay in another school for three years, so it's very good, then the allocation of resources will be more average. And this has an additional benefit, that is, it reduces everyone's anxiety, because you can't and don't have to compete.

Education investment in rural areas is too low. At the Economics 50 Forum, I showed a picture of my elementary school, a physical education teacher teaching children to play basketball, and I said you have to know that this male physical education teacher also teaches math, this is not a joke, this is true.

So I think common prosperity is just linked to the current education reform, and we focus on education together, which is better than doing anything else.