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Since the country embarked on market-oriented reforms, taxpayers have been inundated with more burdens such as supporting the aged, paying for healthcare and education. If that's the case, correspondingly, more wealth should be kept in the taxpayers' pockets. The most unreasonable taxation policy would be one that requires taxpayers to assume more social burdens while also paying for rising taxes.

When faced with unreasonable taxation, taxpayers would resort to tax evasion by all means. This is partly true with the recent lukewarm response from taxpayers in the over 120,000 yuan yearly income bracket asked to file their income tax returns. In reality, how many of them still have more than 120,000 yuan at hand after relative expenditures are taken into consideration? Undoubtedly, intentional avoidance in paying taxes will greatly increase operational costs for the State Tax Bureau.

This is not a complicated mathematical equation to work out, and the policy makers should have the capacity to comprehend that. But why do problems remain ten years after the tax law was first promulgated?

Apparently, tax revenues for year 2007 is expected to hit over 5.1 trillion yuan, approximately 1 trillion yuan more than projected. Diligent tax officers have certainly contributed to the growing revenues. If the objective of the policy makers were to keep accelerating tax revenues, then the likelihood of any tax reduction measure to be introduced in tax reforms is slim, the same could be said about personal income tax.

The progress in personal income tax law reform is dependent on the mentality of policy makers. If policy makers wish to act as a patriarch of a family and assume most social responsibilities, then more wealth will be placed in the state treasury. It is certainly a rational choice, and also has been proved right in many countries, for the government to serve public interests with wealth from the public.

But if policy makers prefer to see its citizens living their own lives and counting on themselves, then most of the wealth should unquestionably be left to them. Both approaches can lead to satisfactory governance, but policy makers have to choose one out of the two.