China+to+cut+tax+for+low+earners+to+boost+stability


 * BBC: http://www.bbc.co.uk/news/world-asia-pacific-13156013
 * April 21, 2011
 * China has recently revised the income tax law in order to narrow economic inequality between the rich and the poor. This policy plans to raise the threshold for personal income tax while exempting millions of poorer people from the tax. This development will cause the poverty line, the measurement of a country's standard of living to rise from 50 to 63 cents. However, the international poverty line has in the past been roughly 1 dollar a day, indicating that many people will remain below the poverty threshold and receive low-income and housing benefits from the government. The main reason for this change is that the widening income gap between rich and poor is leading to social unrest in many parts of the country. This reflects China's current primary aspirations - to make wealth distribution fairer and to help rebalance the world's number two economy.
 * Vocabulary:
 * Income Tax: Annual tax levied by the Federal Government, most states, and some local governments, on an individual's or corporation's net profit.
 * Domestic Consumption: Goods and services consumed in the country where they are produced.
 * Poverty Line: The poverty threshold, or poverty line, is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country.
 * Salary: Fixed amount of money or compensation paid to an employee by an employer in return for work performed.
 * Income Gap: Income inequality - when different people have different levels of income (or wealth) in a society.
 * Inflation: A general increase in prices and fall in the purchasing value of money.

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 * The article discusses China's policy to raise the income tax as a solution to income inequality. This policy will essentially redistribute wealth by soaking money from the rich who will be most heavily affected by the tax, while the poor will be exempted from the tax. I agree with the economics of this article, however I believe that this method is only a temporary solution to a long-term problem. By redistributing wealth, a larger class will be created that will not be able to finance the government, and may cause both political and social instability. A better long-term solution to income inequality is worker education. Economists have demonstrated that one of the largest factors in the rise of inequality is the slowing pace of educational attainment. Worker skills aren't keeping up with the advance of technology and we are left with a larger proportion of workers with inadequate skills. Ultimately, better worker education will make worker's more productive and richer.