Cheng Enfu: Multi-pronged Measures to Promote Common Prosperity
Common prosperity relates to the long-term grand strategy of socialism and is an essential requirement of socialism. Cheng Enfu, a renowned scholar and Academician of the Chinese Academy of Social Sciences (CASS), stated in an exclusive interview that various measures—including state-owned asset dividends, fiscal and tax policies, education reform, and real estate regulation—should be comprehensively adopted to promote common prosperity.
Implementing dividends from state-owned assets for all and raising the individual income tax threshold
"Implementing dividends for all people from the operating income of state-owned assets is an inevitable result of historical development. This can help per capita income for urban and rural residents leap to a new level, promote social equity, enhance people's wellbeing, make people's lives better, and ensure that more obvious substantive progress is made toward common prosperity for all. This demonstrates that state-owned enterprises are, in name and fact, enterprises owned by the whole people; they possess the same market attributes and governance rules as other market entities. This would dismantle Western designations and regulations regarding our country as a 'non-market economy' or 'state capitalism,' allowing us to occupy the legal high ground in international economic and trade rules." Consequently, Cheng Enfu suggested that relevant departments organize forces as soon as possible to conduct theoretical demonstrations and empirical simulations to improve top-level institutional design [1] and implementation details. Pilot programs should be conducted in selected provinces or central cities so that experience can be summarized in a timely manner and promoted nationwide when appropriate. One could consider drawing on the experience of Macau’s "Wealth Partaking Scheme" [2].
Beyond policies for adjusting the ownership structure, fiscal and tax policies are the primary means of promoting common prosperity across all social strata. Cheng Enfu believes that a series of fiscal and tax policies can create stable expectations and positive guidance for owners of different factors [3] regarding their gains from an ex-ante perspective, as well as make necessary adjustments to the distribution of wealth and income from an ex-post perspective.
Cheng Enfu suggested implementing a new progressive income tax based on per capita household income. Based on the monthly per capita income of a household, the tax-exempt amount could be raised to 10,000 yuan, with the taxable income being the balance of actual monthly per capita income minus 10,000 yuan. For the portion of monthly per capita household income exceeding 80,000 yuan (or taxable income exceeding 70,000 yuan), a top marginal tax rate of 60% could be implemented. In many countries, the top marginal rate for personal income tax is quite high. It is expected that such taxation would not only help realize common prosperity for all social strata but also better reflect the contribution of ultra-high earners to national fiscal revenue; furthermore, even under such a tax system, the after-tax income of ultra-high earners would remain very high.
Cheng Enfu emphasized the need to introduce a high-rate "expatriation tax" (referencing the U.S., France, and Canada, targeting taxpayers renouncing Chinese citizenship), inheritance tax (referencing Japan and others), and capital gains tax (referencing the U.S. and others, targeting taxpayers not specialized in the trade of real estate and securities) as soon as possible. Efforts should be made to prevent and stop the massive transfer of assets in China through offshore trusts.
Adopting 12-year compulsory education and implementing free healthcare as soon as possible
Cheng Enfu believes that to promote common prosperity across all social strata, it is necessary to make policy efforts in areas such as educational equalization and free healthcare. There are three main points:
First, fully upgrade compulsory education to the high school level, i.e., adopting 12-year compulsory education. Within this, China especially needs to strengthen vocational education. The purpose of this is to create a more equitable human resource foundation at the starting point, promoting common prosperity for all social strata from the source.
Second, promote the regional equalization of basic education while considering labor mobility. This particularly involves strengthening basic education in rural areas to lay the necessary foundation for rural children to achieve upward social mobility in the future.
Third, implement a system and policy of free healthcare as soon as possible. Before the reform and opening-up [4], China implemented free healthcare, as do many capitalist countries. To demonstrate the achievements and institutional superiority of socialist reform and opening-up, it is necessary to restore the free healthcare system and mechanism as quickly as possible. Currently, when family members suffer health problems—especially hospitalizations for major illnesses—the suspension or even loss of labor capacity combined with the need to bear high medical expenses can have a massive impact on future income, wealth, and life that remains difficult to recover from over the long term. Therefore, it is necessary to establish a policy-based insurance mechanism with minimal individual contributions to share and smooth out such shocks to promote common prosperity.
Suppressing rising housing prices and regulating housing resources to restore equity
Since a homeowner’s employment, daily life, and social interactions revolve around their residence in the long term, certain compensation must be provided during expropriation. Cheng Enfu pointed out that when an owner’s residential area is very large, they will become "suddenly wealthy" due to the expropriation of the property. The problem arising from this is that those with many houses or those whose property is expropriated become wealthy due to locational factors, creating a "special stratum." This contradicts common prosperity for all social strata.
Additionally, Cheng Enfu pointed out two types of difficulties in secondary property transactions: first, high brokerage fees lead real estate agencies to monopolize the market and seek profits by inflating prices, causing the wealth status of those with no or few houses to shift downward; second, the cost of government land acquisition is daily increasing, which negatively impacts old city renovations and other construction in elderly urban areas. To eliminate common prosperity difficulties caused by locational factors and to remove obstacles to subsequent economic development, proper policy arrangements are needed to control housing prices. This includes significantly reducing real estate brokerage fees and punishing behavior related to monopolies and price manipulation.
Furthermore, Cheng Enfu emphasized that a real estate tax should be levied. The optimal plan would be to determine a certain tax-exempt amount for every citizen over the age of 18 based on income and housing prices in different regions, ensuring that the majority of residents do not have to pay the tax, so as not to affect the quality of life for the majority. For those exceeding the amount or area, a dense-bracketed and substantial progressive tax rate should be implemented.
"The primary purpose of this taxation is to suppress property speculation and the polarization of wealth in housing. Which specific plan can achieve the aim of the real estate tax should first be discussed by the whole people, and launched only after the plan is refined. To this end, a national housing census should be conducted as soon as possible to clarify China’s housing inventory. Referencing the experience of other countries, necessary measures—including taxes and fees—should be taken immediately regarding vacant and idle houses to encourage their rental or sale, thereby suppressing rising housing prices and regulating housing resources to restore equity," Cheng Enfu finally emphasized.