Tax Reduction Incentives and Children's Human Capital Accumulation:Evidence from Personal Income Tax Reform in 2011
As one ages,the first demographic dividend will eventually disappear.It is particularly important to accelerate the cultivation of the"Second Demographic Dividend."High-quality human capital not only constitutes the core element of the"Second Demographic Dividend"but also the source of maintaining long-term reasonable economic growth.The report of the 20th National Congress of the Communist Party of China proposed that"talents must be the first resource,and we must thoroughly implement the strategy of strengthening the nation with talents."Human capital is internalized in talents,improving the level of children's human capital by giving full play to the foundation and important role of finance is an important means to deeply implement the strategy of strengthening the nation with talents.As one of the few taxes established by National People's Congress legislation,the adjustment of the tax system has a significant tax reduction incentive effect.Among them,the personal income tax reform in 2011 had the most profound effect.The 2011 personal income tax reform was officially implemented on September 1st of that year.In addition to raising the threshold for personal income tax,it also adjusted the progressive tax rates for personal wages and salary income taxes for the first time:the nine-level tax rate was progressively reduced to seven levels,and the 15％and 40％tax rates was removed;the first tax rate was reduced from 5％to 3％,and the application scope of the two low tax rates of 3％and 10％was expanded.Tax reduction incentives directly affect the family environment and parents'rearing ability and play a decisive role in the formation of children's cognitive and noncognitive abilities and even the development of adults.Based on this,our study uses the China Family Panel Studies(CFPS)data from 2010 to 2018 to construct a panel data set,and combining it with the 2011 personal income tax reform as a quasi-natural experiment,the study constructs a triple difference identification strategy and empirically explores tax reduction incentives effects on cognitive and noncognitive abilities of the younger cohort of children.The study found that compared with children in the older cohort,tax cut incentives significantly improved the cognitive and noncognitive abilities of children in the younger cohort.This conclusion remains robust after a series of tests.In addition,the mechanistic analysis reveals that tax reduction incentives affect the cognitive and noncognitive abilities of adolescents through two channels—improving family education investment and parenting quality.Finally,the heterogeneity analysis indicates that middle-income families,poor educational backgrounds,lower ability base,and female and only-child groups benefit more from this tax reduction.The above findings provide empirical evidence for improving the intergenerational mobility of human capital and thus achieving common prosperity while deeply implementing the talent-strengthening strategy under aging.Compared with the existing literature,the contribution of our study is reflected in the following three aspects:First,from the research perspective,our work explores the impact and mechanism of tax reduction incentives at the family level on children's human capital accumulation,enriching the theoretical basis of human capital.Second,in terms of research methods,using the personal income tax reform as a quasi-natural experiment,a difference-in-differences model,and the panel event study method,this study not only analyzes the static and dynamic effects of tax reduction incentives on children's human capital accumulation but also analyzes its influence mechanism and development process in detail.This alleviates its potential endogenous problems to some extent and is more robust than similar studies.Finally,in terms of policy implications,it provides a certain policy reference for improving the level of human capital and its intergenerational mobility while considering fairness and efficiency.
Tax Reduction IncentivesHuman CapitalTriple Difference ModelEvent Study Method
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