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The data from the State Administration of Taxation do not lie, revealing three truths about Chinese people’s income

The data from the State Administration of Taxation do not lie, revealing three truths about Chinese people’s income插图

After the Chinese New Year, I came back from my hometown. I found that many people were talking about comparing the income of different people in big cities and small cities. Let’s just talk about the truth about Chinese people’s income today. I don’t know if you have ever had this feeling: according to some statistics, your income is at a medium level, or even “nominally rich”. But when you look at social media, everyone has an annual salary of one million, and you always feel that you are a “poor person”. Where does this sense of contradiction come from?

Today, we will start with the data of the State Administration of Taxation in 2024 and talk about the three truths of Chinese people’s income-first, there are more “poor people” than you feel; second, “rich people” are poorer than the data; third, income has not yet come up.

Why are there the above three situations?

Let’s start with the data of the State Administration of Taxation. In October 2024, the State Administration of Taxation announced the 2023 individual income tax settlement report. To put it bluntly, from the perspective of individual income tax, how much everyone earns. I would like to emphasize that this data is the most realistic income data that China can obtain with the power of the country. It can be said that there is no data more reliable than it.

The data shows that the proportion of people who do not need to pay personal income tax exceeds 70%, that is, among those who are employed and receive wages, more than 70% of them have a monthly salary income of less than 5,000 yuan. Among the remaining less than 30% of actual tax payers, more than 60% are only subject to the lowest tax rate of 3%, that is, their wages do not exceed 8,000 yuan.

What does it mean? It is that the public opinion of “annual income of one million per capita” in various social media and short videos is too outrageous. Based on this set of data, we can simply estimate China’s actual income structure. Among all employed people, more than 70% of employed people have a monthly income of less than 5,000 yuan, that is, an annual income of no more than 60,000 yuan. And those who can reach a personal income tax rate of more than 10%, that is, people with an annual income of more than 96,000 yuan, only account for 30%*(1-60%)=12%. In other words, if your annual pre-tax salary reaches 100,000 yuan, then congratulations, you have almost outperformed 90% of the workers in the country.

By further digging into this report, I came up with the three key truths mentioned at the beginning, let’s talk about them one by one.

Truth 1: There are more “poor people” than you feel

Let’s talk about the first truth first, “There are more poor people” than you feel.

As mentioned earlier, “70% of people have a monthly salary of no more than 5,000 yuan”, this conclusion may be questioned by many people: Is it because many rich people use improper means to avoid taxes that lowers the average income? If you have this idea, you are probably fooled by the performance in the short video.

Although it is true that the statistics of the State Administration of Taxation do not rule out a part of the high-income group who use various means to avoid taxes, this group is at most in the millions, which accounts for a very low proportion of the total employed population of 740 million, so the impact on the core conclusion is not that great.

In fact, the country will help us count the income structure every year, but you may not have noticed it before. Let’s take a look at how the official statistics are calculated: According to the data from the National Bureau of Statistics, in 2023, the average annual salary of employees in non-private units in urban areas across the country is about 120,000 yuan, while the average annual salary of employees in private units in urban areas is only about half of that in non-private units, which is about 60,000 yuan.

Considering that the employment population in non-private units only accounts for about one-third of the total urban employment population, we can calculate the average annual salary of the overall employment population in urban units across the country last year. I won’t read the specific calculation process, I put it in the manuscript, I will just say the result, the calculation is 80,000 yuan.

Calculation formula: 120,000✖1/3+60,000✖2/3=80,000 yuan.

This figure reflects the annual salary level of employees in “urban” units, which accounts for about 60% of the total employed population, and the salary level of nearly 40% of “non-urban” employees is not included: this part of the population is often employed in township enterprises or rural areas, and migrant workers engaged in low-income jobs in large cities. We estimate that the annual average salary of non-urban employees is 40,000 yuan.

Now, based on the proportion and annual salary distribution of “urban” and “non-urban” employees, we can roughly get the overall average salary of domestic employees, and the average monthly salary is about 5,333 yuan. I have also put the calculation process here in the manuscript, you can check it out.

Calculation formula: (80,000✖60%+40,000✖40%)/12 months=5,333 yuan.

After deducting special additional deductions such as “one old and one young” and the tax-free amount of social security and provident fund, this data is consistent with the conclusion in the personal income tax data that “70% of people have a monthly salary of less than 5,000 yuan.”

Look, this is the truth. As for why this is seriously inconsistent with your perception on social media, you can think about the following questions in a different way: When you are not doing well, will you show off in your circle of friends? Do you like to watch the ordinary daily life of ordinary people? And will the platform’s big data algorithm push things that the public doesn’t like to watch? After answering these questions, you must have a clear idea in your mind.

Truth 2: “Rich people” are poorer than in the data

In this report, I observed and extracted the second truth that “rich people” are poorer than in the data. Simply put, the “rich people” in the statistics are not as good as in the statistics in reality.

Although the country has not specifically announced the proportion of different income groups in the overall personal tax income, last year an institution deduced the proportion of tax payments of people at different salary levels in the current wage personal tax income based on the “wage income after tax throughout the year” counted in the China Family Tracking Survey Database: According to estimates, the middle-income group with an annual income of 96,000 to 360,000, the total personal tax paid accounts for 63.3% of the wage personal tax income, about two-thirds. In other words, the working class and the middle class are the main contributors to personal tax. And it is precisely this part of the middle-income group that contributes the bulk of personal tax that has been most negatively impacted by the macro situation in the past two years.

Data shows that the growth rate of domestic overall disposable income has slowed down in recent years. In 2022, the income growth rate of the lower-middle income group fell by 7.53%, significantly higher than the 1.92% of the high-income group and the 2.68% of the low-income group.

This shows that in an environment of economic uncertainty, the middle class and white-collar workers may be the first to bear the brunt. This also answers from another perspective: why these “rich people” in the statistics with a monthly income of over 10,000 do not actually feel rich.

There was once a calculation that Xiao Zhang, a middle-level worker in Beijing, had an annual salary of 300,000 before tax, a monthly salary of 25,000, and after deducting five insurances and one housing fund and personal income tax, he received about 19,000 per month. Conservatively, based on the average monthly mortgage payment of 12,000 yuan in Beijing, Xiao Zhang and his wife each bear half, which is 6,000 yuan/month. Add to that the 2,500 yuan/month car loan, 3,000 yuan/month children’s education fund, 2,000 yuan/month elderly support, and 3,000 yuan/month daily expenses. After all the calculations, Xiao Zhang’s monthly income surplus is less than 3,000 yuan. This is the result of the calculation under the premise of dual employment, excluding social entertainment, medical expenses, etc. It is no wonder that some middle-class white-collar workers feel a little uncomfortable wearing the hat of “rich people” after reading the report results of the State Administration of Taxation.

Truth 3: The current income has not come up

According to the report, the third truth I came to is that the current income has not come up.

Regarding the topic of “how to make ordinary people live more affluently”, many experts have put forward some reform suggestions, such as “further raising the individual income tax threshold” and “taking into account the differences in regional living costs when setting tax rates”.

I think that although these solutions can help people relieve pressure to a certain extent, they are only temporary solutions and not fundamental solutions. The root cause of the problem lies in income and distribution. Why do I say that?

I will talk about a few data without going into details: In the past 20 years, the absolute growth rate of my country’s GDP has reached 829%, while the growth rate of “per capita wage income”, which mainly measures the sense of gain of ordinary people, is 629% during the same period, which lags behind the GDP growth rate to a certain extent; in addition, from the perspective of the proportion of disposable income to GDP, in 2023, China is about 46%, the world is 60%, and the United States is 80%; as for the Gini coefficient, which reflects the income distribution gap among residents, China has always maintained a high level of 47%-50%, exceeding the United Nations’ warning value of 40%, and the higher the Gini coefficient, the greater the income distribution gap; while the Gini coefficients of other countries are 40.8% in the United States, 36.1% in the United Kingdom, 31% in Russia, and 24.9% in Japan.

So I think the core of the future is to reduce the Gini coefficient in income distribution and truly increase the proportion of disposable income in GDP, so that ordinary people will not feel “rich in name but poor in reality”.

So, what are the directions of the country’s efforts?

For example, in the primary distribution link, the country is increasing its support for small and micro enterprises, helping them to reduce operating costs through tax cuts, fee reductions, and providing entrepreneurship subsidies, etc., so that they can increase employment opportunities, so that more people can get income and increase disposable income levels.

For example, in the redistribution link, the simplest understanding of this redistribution is that after everyone gets their wages, the country will take a part from the high-income group and give it to the low-income group. One of the current trends is to levy more taxes on high-income groups and less taxes on the middle and lower classes, and then give these taxes to the middle and lower classes in the form of various subsidies, such as increasing basic pension insurance and expanding social security coverage. There are also similar ones, such as using the profits of state-owned assets including state-owned enterprises to enrich social security funds, and national transfer payments, using the money of strong provinces to subsidize weak provinces, etc. In fact, the call for optimizing redistribution has always been strong, and it is also a current focus issue.

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