The supply-side school of fiscal policy advocates a view of fiscal policy that reduces progressive income tax rates, reforms the social welfare system, and balances the budget. The following is my carefully organized fiscal policy to promote supply-side reform of the relevant information, I hope it will help you!
Fiscal Policy to Promote Supply-Side ReformFolding Down Tax Rates The supply-side school of thought asserts that stimulating demand growth with fiscal spending where the natural drivers of economic growth are stifled can only be inflationary, and that progressive, high income tax rates are a major impediment to stifling growth and inhibiting productive development.
The supply school argues that tax cuts, especially lower marginal tax rates, can have a multifaceted positive impact on the economy, such as encouraging people to work overtime and run active businesses, delaying retirement, and shortening the period of inactivity, thereby raising incomes. People would then have more money to spend and, in particular, more money to save, and the combination of savings and income incentives would, in turn, encourage investment. In this respect, it reflects a different focus from the Keynesian school of thought, which holds that tax cuts work only to increase aggregate demand. The supply school argues that tax cuts must be designed to incentivize saving and work and to give investors a boost, and advocates progressive taxes and corporate tax cuts. It is in complete opposition to libertarians who advocate tax increases for the higher income brackets and tax cuts only for the lower income brackets. The supply-side school argues that when high progressive tax rates prevent entrepreneurs from accumulating wealth, society loses far more than the tax revenue; it loses the spirit of invention, innovation, risk-taking, and creativity that entrepreneurs use to develop their own businesses (see supply-side tax thinking).
Reforming Welfare
The supply-siders argued that it was social welfare spending that stifled economic growth in terms of fiscal spending. They argue that income transfers - welfare, social security, unemployment benefits, etc. - have the same negative effect on individual enterprise as highly progressive income tax rates. This is because the level of benefits is not much lower than the individual's net income from work, and the effective tax rate, which is overtly levied after a household survey of applicants prior to the granting of benefits and allowances, turns the receipt of benefits into the earning of some people's personal income by others. Therefore, this system encourages those who do not want to work and discourages those who are active and enterprising. They argue that the current welfare system in the United States has, on many occasions, allowed people on welfare to receive benefits that exceed the net income levels of many hard workers. This irrationality will lead to higher unemployment. Workers are willing to take seasonal jobs knowing that unemployment benefits will help them survive unemployment, while employers are willing to lay off workers during the off-season because workers can receive unemployment benefits. The Supply Scholars attacked the U.S. federal government's welfare policy as an expression of an outdated Keynesian view. It is concerned only with maintaining individuals' income levels, regardless of whether they work and save, as long as they can spend. The system is utterly absurd when people can live just as well or even better on unemployment benefits than they can on hard work.
To achieve equilibrium
The supply-side school opposes deficit fiscal policy. They argue that increasing budget deficits only deprive private enterprise of needed capital and create a "crowding out" effect in financial markets; or that inflation results when the deficit incurred by the government is made up by an increase in the amount of money issued. If taxes and government expenditures were to be increased in equal measure, the discouragement of private enterprise would further depress the economy. Although they opposed deficit finance, they did not favor balanced budgets as a precondition for tax cuts. They attacked those who advocated a fiscal surplus before tax cuts by calling them "traditional budget balancers". They argue that the best way to deal with spendthrift liberals is to prioritize tax cuts. Supply-siders also reject the idea that deficit finance causes inflation. They point out that inflation is essentially a monetary phenomenon. If the U.S. Federal Reserve System does not increase the money supply appropriately, then inflation will occur regardless of whether the budget is balanced or not. If the Treasury sells all of its own bonds to the public to cover deficits, it is simply absorbing an equal amount of private savings and raising interest rates. Certainly it is not an appropriate way to exclude private investors from the market, but it is not the root cause of inflation. Without an excess increase in the quantity of money, there would be no general rise in the price level.
Active fiscal policy to help supply-side reform■Supply management and demand management are complementary rather than antagonistic, and the two should be implemented synergistically in practice. As an important means of demand management, fiscal policy should play an active role to cooperate with the supply-side structural reform, to ensure stable growth and adjust the organic balance of the structure, so that the national economy to achieve medium-high speed sustainable development. The fiscal deficit rate should be increased moderately in phases; the tax cut policy should be fully implemented to reduce the burden on the real economy; a market environment should be created to help deepen the promotion of PPP, optimize the structure of fiscal expenditure and pay attention to effective investment; and an incentive mechanism should be constructed that is compatible with the background of China's economic reform and development, and the enthusiasm of local governments for scientific development should be fully mobilized. Through a combination of measures to ensure that fiscal regulation and control of the precise force, to achieve the short-term boost in effective demand, in the long term to optimize the supply structure and quality of the goal.
Supply-side reform requires active fiscal policy to cooperate
The 2015 Central Economic Work Conference emphasized that ? to focus on strengthening supply-side structural reform while moderately expanding aggregate demand.? In the coming period, the focus of national economic management will focus on supply management, but this is not a negation of demand management. On the theoretical level, the supply side and demand side is actually the operation of the national economy of the two sides: in the short term, the alternation of prosperity and depression from the total demand around the total supply fluctuations caused by the cyclical changes in economic prosperity; but in the long term, the constant power of economic growth from the effective supply of effective demand response and guidance. Supply management and demand management are complementary rather than antagonistic, and they should be implemented in concert in specific policy practices. As an important means of demand management, China's fiscal policy still has a wide operating space and should actively play a role in order to cooperate with the supply-side reform. It is worthwhile to start from two aspects to explain the doubts.
On the one hand, a moderate expansion of demand should be used to ease the spillover tensions arising from structural optimization reforms. In recent years, China's economic downward pressure has increased, which has the long cycle of the world economy and China's own economic operation cycle *** with the intertwined factors, but also China's past long-term rough development of the accumulated structural factors. It can be said that the weakening of potential aggregate supply triggered by the imbalance of economic structure is the root cause of the decline in economic growth.? Supply-side reform? is to optimize the structure, quality and efficiency of the supply side of the national economy, so that the supply structure can effectively adapt to changes in the demand structure, complete the market clearing, and promote economic transformation and upgrading. However, it should be noted that, first of all, the demand side of the national economy is still relatively weak (PPI, CPI and PMI indexes are low, overcapacity, lack of confidence in market investment and consumption, and relatively low exports), which originates from the so-called "supply-side reform" of the national economy by Irving Fisher. Fisher's so-called ? deflationary debt effect the theory has recently been widely discussed by academics. And the macroeconomic frontier theory of ? Say's inverse negativity? That is? Persistent short-term demand shortfalls will inevitably lead to the weakening of medium- and long-term supply capacity, resulting in a decline in the potential growth rate, triggering a sustained downturn in the medium and long term. The Chinese economy has been given a profound warning. Therefore, to recognize the persistent downturn may become a potential risk to the future of China's economy, scientific and effective demand management policies urgently need to be launched. Secondly, even if vigorously promote structural reforms should be demand moderate expansion synergistic cooperation. Undeniably, to go to production capacity, inventory, deleveraging and other structural optimization and adjustment programs, in the short term will inevitably increase the downward pressure on the economy, during which the labor force unemployment and re-employment, the elimination of the old business and the new business remodeling and other issues, are to be demand management to support the bottom. Demand management usually resort to monetary policy and fiscal policy. However, compared with fiscal policy, China's monetary policy is more prominent in the aggregate characteristics, while the structural characteristics are still not very good. The current monetary policy in the transmission mechanism and control parameters are still not smooth; as the micro body of the receiving end of the regulatory signal is still not optimized reconstruction,? Zombie enterprises? To be cleaned up, rigid payment and budgetary soft constraints prevail, which makes the micro-basis of the monetary control signal sensitivity is missing. In order to resolve these obstacles, need to further deepen the financial reform and market-oriented reforms, optimize the financial ecological environment of monetary regulation and micro-basis. Right now if rashly take large-scale monetary easing, will undoubtedly form? Diffuse irrigation? Not only can not effectively alleviate the structural liquidity hunger in the market, but also interfere with market clearance, help rise asset price bubbles and increase the pressure of capital outflows, and may even lay a new round of inflation risk in the next few years, leading to structural contradictions continue to solidify. Therefore, the moderate expansion of demand for structural optimization and reform to create a sound macroeconomic environment of the task is also mainly rely on fiscal policy, and monetary policy with fiscal policy to play a supporting role in hedging.
On the other hand, the supply effect of fiscal policy should not be ignored. Keynesian framework, fiscal and monetary policy is limited to the camera choice to play on aggregate demand? Against the economic wind? Regulate the work. But the reality of economic operation, compared with the weak supply effect of monetary policy, fiscal policy in the long term but can effectively play the supply effect. If fiscal policy is coordinated with industrial policy, regional policy, micro-policy and reform policy, it can produce micro- and meso-level effects, improve the supply structure and quality, and enhance the efficiency of economic operation. For example, the use of tax, subsidy and redistribution policies can reduce production costs, motivate enterprises and workers, and optimize industrial and regional structures. After the organic sum of micro and meso categories, the quality and efficiency of supply at the macro level will be improved. In addition, financial investment with supply effect (equipment renewal, infrastructure and plant renovation, investment in education, etc.) can not only boost demand in the short term, but also form efficient capital accumulation in the long term, which will optimize the potential total supply and inject a solid impetus for long-term economic growth.
In summary, the active fiscal policy (complemented by prudent and slightly loose monetary policy) to help the supply-side structural reform, should be a wise choice as the concept of macroeconomic control in the near future. Neither to engage in large-scale, inefficient strong stimulus, but also to prevent pro-cyclical contraction of the economy triggered by structural reforms, to ensure that the supply-side reforms to provide a sound macro-environment, and gradually build a healthy micro-foundation for it.
Implementation of active fiscal policy needs to be resolved which dilemma
It is undeniable that the traditional fiscal policy in the past has shown fatigue. The relevant departments recently advocated a positive fiscal policy, but many local governments as well as the private sector are in a spontaneous deleveraging state, coupled with the short-term fiscal gap difficult to bridge the gap and other factors *** with the superposition, which produces a hedge effect to some extent may weaken the effect of fiscal policy. The implementation of positive fiscal policy process, need to properly resolve the following predicament.
First, the fiscal revenue and expenditure gap needs to be bridged. In recent years, due to cyclical and structural factors, the economic growth rate around the world showed a decline. Compared with previous years, the growth rate of government revenue at all levels is lower, but the pressure on spending remains high. According to the Ministry of Finance, in 2015, the national general public **** budget revenues increased by 5.8% on a same-caliber basis, but the same-caliber growth of general public **** budget expenditures was 13.17%. Under the motivation of reducing leverage, local governments have blocked channels such as obtaining debt income from land concessions and extra-budgetary revenues, while new regulated financing channels are relatively limited. Local governments still bear more authority and expenditure responsibilities, active fiscal policy to make it under greater pressure, the emergence of local matching funds gap phenomenon; local debt replacement only part of the stock of debt to alleviate the cost of pressure, the remaining 11 trillion stock of high interest payments should not be ignored; with the reform of the social security field of institutions and organizations such as pensions and insurance reforms, social security expenditure burden will also rise in the future. The above factors make the fiscal imbalance, the local financial power space constitute a certain test.
Secondly, the marginal output effect of traditional financial investment weakened, and the total factor productivity and production efficiency formed a squeeze. In the past, the traditional inefficient and repetitive investment in economic growth has been increasingly effective, which led to overcapacity and capital mismatch also makes the return on capital weakened, and squeezed the total factor productivity. If we consider the structure of investment, generally speaking, advanced equipment investment to promote total factor productivity, and real estate and other investment in construction and installation investment mainly inhibit total factor productivity. 2008, China's real estate and infrastructure investment in the rapid expansion of the accumulation of a certain amount of bubbles, to the small and medium-sized cities, real estate market risk; but the proportion of investment in equipment to the total investment has shown a rapid decline in total factor productivity and efficiency of production by the total factor productivity. Total factor productivity and production efficiency is squeezed from its own. Fiscal policy should be coordinated with industrial and regional policies to optimize the investment structure and attention to effective investment, improve the marginal efficiency of investment, and promote total factor productivity, so as to achieve the short-term moderate expansion of demand, the long-term optimization of the quality of supply and structure of the effect.
Third, because of the local government's original assessment mechanism is broken, some areas of the phenomenon of non-adaptation, weakening the effect of fiscal policy implementation. First of all, in recent times, the financial project investment approval efforts, but the actual rate of funds in place and the project start rate is not optimistic. Many key projects and people's livelihood projects have been delayed, including projects involving the country's long-term development, such as railroads, highways, power grids and communication facilities renovation, agricultural infrastructure and dangerous housing renovation, and other projects, for which funds are not in place. Secondly, compared with the past, the growth rate of China's fiscal expenditure slowed down overall in 2015, while local fiscal expenditure fell back more significantly. The growth rate of local financial deposits has accelerated, accumulating a large amount of solidified capital deposits. According to relevant experts' calculations, bank deposits of government departments have climbed at an annual rate of about 20% in recent years, accounting for an increasing proportion of M2. The lack of enthusiasm of local governments to revitalize the stock of funds has led to a large number of fund balances. Inefficient operation of financial funds has compressed the space for macro policy implementation and dragged down economic growth. Of course, this is also related to the tightening of financial monitoring in recent years, as well as the fund management model machinery. The central financial funds in the allocation process, the distribution of different departments and over-emphasis on earmarking, weakening the flexibility of the use of funds, resulting in the local government on the central allocation of funds to the use of the enthusiasm and initiative to decline.
Fourth, the implementation of PPP policies need to be optimized. Through the innovation of investment and financing system and the introduction of PPP, help to ease the pressure of capital and broaden the investment and financing channels, to realize the interests of government capital and social capital **** win. However, PPP is still in the exploratory stage, and the actual operation is characterized by loud thunder and little rain. State-owned enterprises and urban investment companies often act as the main force, while government departments and the private sector is a lack of linkage between the effect of government capital is still difficult to pry private capital on a large scale. The reason for this is, on the one hand, due to the economy of the rule of law is not high, the relationship between government and enterprises is not equal, resulting in the private capital of the prospects for cooperation is not clear. On the other hand, in the process of PPP implementation, the contractual relationship between the government and enterprises has yet to be perfected.PPP has the characteristics of large investment, long term, low rate of return, weak liquidity, etc., which contains certain market risk, project risk, legal risk and policy risk, but the government and enterprises are still ill-defined in terms of the rights and obligations, risk sharing and compensation for the benefits, etc. In the PPP cooperation, the relationship between the two is still difficult to leverage private capital on a large scale. In PPP cooperation, the lack of benefit synergy mechanism between the two affects the enthusiasm of social capital. In addition, PPP in the implementation of some undesirable phenomena: for example, because of the financing platform is cut off, some areas in the name of PPP, but to take explicit shares of real debt and capital guaranteed repurchase in disguise financing. This not only failed to drag the PPP, but also make its reputation affected to some extent.
Thinking about optimizing fiscal control in the context of supply-side reform
In order to create a good macro-environment for supply-side reform, it is necessary to carry out a proactive fiscal policy in the future to ensure that? Supply-side structural reform? and stabilizing growth go hand in hand. The fiscal deficit rate should be increased moderately in phases; the full implementation of tax cuts to reduce the burden on the real economy; the creation of a market environment conducive to the deepening of the PPP, and actively optimize the structure of fiscal expenditure and pay attention to effective investment; and the construction of incentive-compatible mechanisms compatible with China's economic reform and development in the context of the times, and the full mobilization of local governments to fully mobilize the enthusiasm of scientific development. By taking multiple measures to ensure that the fiscal policy is accurate and effective, the goal of boosting effective demand in the short term and optimizing the supply structure and quality in the long term will be achieved. For China's economic development in the high-speed injection of lasting power to promote China's economic giant ship steady and far, and ultimately to achieve the grand goal of building a moderately prosperous society in all aspects.
First, find the focus point to ease the pressure on financial resources, phased increase in the deficit rate, to release the space of available funds, to create the conditions for the precise strength of fiscal policy. Theoretically speaking, fiscal policy in the implementation of the three objectives of tax cuts, expenditure increases and debt control between the trilemma dilemma. Under the goal of increasing expenditure and tax cuts, in order to alleviate the financial pressure, then increase the deficit rate has become an inevitable choice to bridge the gap between revenue and expenditure. It is gratifying that China's fiscal deficit and government debt still has a lot of room for expansion. In terms of the deficit, the current 2.3% deficit rate is far lower than the 3% red line set by Mayo; in terms of debt, the central government debt burden is low, local debt, although there are local and regional risks, but compared with the welfare-type, consumption-type debt of Europe and the United States, the vast majority of China's local debt has a sizable size of the physical assets for support. If we add the other resources (land, forests and minerals, etc.) that the government can deploy, the proportion of debt to the government's broad assets is even lower. Therefore, the macro strategy of relying on a moderate expansion of the deficit to ease financial pressure still has broad room for maneuver. If PPPs can be used to leverage social capital in the future, a deficit rate of around 3 percent should be able to basically satisfy fiscal funding needs. As far as policy practice is concerned, deficit expansion, debt issuance and local debt replacement should be operated in tandem. First of all, the State Development Bank, the Ministry of Finance and other departments to issue special bonds or special treasury bonds, and project capital investment, equity investment and other ways to support local key infrastructure and livelihood projects, during which the proportion of the central capital to expand moderately, to alleviate the problem of shortage of funds for local projects; secondly, should improve local debt management and disposal mechanism, accelerate the remaining 11 trillion stock of local debt replacement digestion, effectively reduce the debt interest burden. Effectively reduce the debt interest burden. At the same time, the future of the social security fund expenditure gap should also be emphasized. The layout of state-owned capital should be rationally adjusted, and part of the state-owned capital and earnings can be supplemented into the general budget and pension and other social security fund budget, which will reduce the rate of social security contributions, alleviate the pressure on social security funds. Of course, for those involved in the ? five key tasks? areas, in order to cooperate with the issuance of special treasury bonds and special bonds, the central bank should also be timely targeted monetary easing to relieve fiscal pressure, and resolve the potential deflationary risks arising from structural optimization reforms.
Secondly, the active implementation of structural tax cuts and comprehensive fee clearing, and the effective use of tax policy demand effect and supply effect, to short-term reduction of tax revenue for the long-term sustainable development of the economy to increase the potential. The reduction of tax revenue in the short term will increase the potential energy for the sustainable development of the economy in the long term. Reducing the tax burden of the real economy will realize the expansion of demand in the short term, stimulate the production enthusiasm of the micro-principals in the long term and optimize the total supply of the national economy. First, under the premise of strengthening the top-level design and overall planning, strictly implement the principle of tax law, and comprehensively promote? Reform of VAT for the manufacturing sector. reform, reduce the value-added tax (VAT) rate for the manufacturing sector, and resolutely clean up unregulated administrative fees, funds and mark-ups, so as to lower the operational burden on enterprises and increase their incentives to produce and innovate. At the same time, it is necessary to further compress the three public funds and unnecessary administrative expenditures to avoid ? face-saving projects? and other inefficient investments to broaden the space for the real economy to reduce the burden. Second, increase tax incentives for enterprise equipment investment and upgrading, encourage the purchase and replacement of advanced equipment, accelerate capital depreciation, and improve production efficiency and total factor productivity. Third, improve tax incentives for new business forms such as entrepreneurship and innovation, and abolish tax incentives for investment in old business forms such as heavy and chemical industries. Increase tax support for new products, energy-saving and environmental protection and other emerging economic models and their corresponding consumption, and reduce or waive taxes on all aspects of high-tech industry development; implement structural tax incentives for high-energy-consuming and high-polluting enterprises in accordance with energy-consuming and polluting indexes, and force the old industry to accelerate technological updating and industrial transformation. Ensure that the tax cut policy in the short term to expand demand, in the long term to optimize the supply structure and quality.
Third, pay attention to the scientific nature of financial expenditure, improve the efficiency of financial investment, to achieve the double optimization of the supply side and demand side. Especially in the field of investment, the relevant departments need to pay attention to the consideration of investment direction and investment structure, comprehensively reflecting the strategic, global, basic and long-term nature of government investment, effectively improve the marginal output efficiency of financial funds, and enhance the society's total factor productivity and people's living standards. According to the five development concepts, future expenditures should focus on the following areas. One of them is to increase infrastructure investment in small and medium-sized towns, central and western regions, and rural areas (such as shantytown upgrading, urban pipelines, intercity transportation, water conservancy, and power and communication equipment) to optimize the level of public ****service provision. In conjunction with the reform of the household registration system, to promote people-oriented urbanization, the purchase of housing subsidies to farmers to encourage them to settle in the city, which can also improve people's livelihoods, release consumer demand and digestion of real estate inventory, and effectively reduce market risks. Secondly, increase investment spending on major scientific and technological innovation projects to establish a synergistic, cluster-based national innovation system. The government should fund the construction of innovative industrial clusters to integrate R&D forces, break through the innovation constraints of micro-individuals, and promote the complementarity of strengths and technology diffusion among enterprises; improve the support for innovation-driven, and build a synergistic national innovation system among the government, enterprises, and scientific research institutes; and increase the investment in strategic innovations based on quality and efficiency, to seize the commanding heights of emerging science and technology, and to ensure China's mastery of cutting-edge technologies. Thirdly, we will increase expenditure on poverty alleviation and various types of expenditures to supplement shortcomings. Actively implement precise poverty alleviation, pay attention to the industrial poverty alleviation, poverty alleviation of immigrants and the minimum living standard guarantee and other areas of financial support, to transfer payments to accelerate the income growth of the poor class, and promote the overall domestic consumption demand; the financial sector should also cooperate with the task of removing production capacity as well as cleaning up zombie enterprises, support for mergers and reorganization of enterprises, and do a good job in labor force unemployment protection, retraining and re-employment, and other social policies to support the work of the bottom. In addition, there is also vast room for investment in education, pension, medical and health care, ecological protection, land greening and high-end service industries, which are related to the quality of people's livelihood and the construction of welfare system. Ultimately, the scientific and efficient fiscal expenditure in the moderate expansion of aggregate demand at the same time, effectively improve the quality of the supply side, to promote China's industrial structure, regional structure and income structure continue to optimize.
Fourth, to create a market environment that helps promote PPP projects, and fully release the potential of social capital, especially private capital.PPP is the key to help the supply-side structural reforms, improve the PPP system is to implement positive fiscal policy, optimize the supply mechanism of public **** services is an important means. In the future, social capital should be actively introduced to reduce the pressure on fiscal funds by creating a rule-of-law operating environment, establishing a risk***-bearing mechanism, and improving the spirit of contract. First of all, we should actively build an operating environment based on the rule of law, develop an equal government-enterprise relationship, and improve the spirit of contract between the government and enterprises. The central government needs to increase the supervision of local governments, and resolutely eliminate the use of PPP as a financing platform to implement debt financing in disguise, so as to avoid the weakening of the financing environment caused by the damage to the reputation of PPP. Establish a synergistic mechanism between local governments and enterprises in the cooperation of PPP projects, formulate scientific and equal cooperation plans and make risk treatment plans in advance to ensure that both parties can act in accordance with the contract rules and regulations in the cooperation of PPP, and effectively avoid moral risks and other subsequent problems. Secondly, a part of the projects with higher returns will be included in the scope of PPP to improve the attractiveness to private capital. At the same time, on the basis of strengthening risk regulation, PPP finance (such as asset securitization) is developed through financial innovation to solve the problems of insufficient capital liquidity and equity exit of PPP in pre-financing and after landing. Finally, because PPP mainly focuses on infrastructure projects with characteristics such as long term, low yield and weak liquidity, government departments should take the initiative to make contractual commitments to bear certain legal risks and policy risks to ensure that government and enterprises realize ? Benefits **** enjoy, risk **** bear? to enhance the social capital of the PPP project investment security and trust.
Fifth, explore the construction of incentive-compatible mechanisms that closely match the context of China's economic reform and development, fully mobilize the enthusiasm of local governments, and improve the implementation of fiscal policy at the grassroots level. Promote the optimization and reconstruction of the relationship between the central government and the local government in the institutional framework to actively implement the requirements of the central policy, so that they give full play to the subjective initiative to promote economic development, so as to cast the central and local synergies to promote the building of a moderately prosperous society in all aspects of the endogenous driving force. First, the rule of law in macroeconomic management should be promoted, and the Basic Law on Macroeconomic Regulation and Control should be formulated and improved. China's macro-control focuses only on policy implementation, in macro-control objectives, principles, procedures, central-local relations and other aspects of legislation is insufficient, and excessive reliance on administrative power, the lack of legal safeguards and institutional construction. This is inconsistent with the goal of market-oriented reform, and to a certain extent, it has also caused the central-local game and policy implementation from top to bottom in the process of layer by layer weakening. Promoting the rule of law in macro-adjustment will greatly enhance the authority of the central policy at the institutional level, and improve the efficiency of the implementation of fiscal policy at the grassroots level. Second, the performance appraisal mechanism should be optimized to implement positive incentives for the scientific development of grassroots governments and mobilize the enthusiasm of local governments. On the premise of weakening but not abandoning the GDP index, pay more attention to the effectiveness of economic reform and development and transformation and upgrading, strengthen the assessment of green and livelihood and other indicators related to the immediate interests of the masses, and improve the quality and effectiveness of economic development. It is important to break down both? GDP-onlyism? , but also to incentivize local governments to promote economic transformation through scientific and effective means of investment. In addition, on the basis of promoting anti-corruption and cleaning up gray income, a more scientific, sunny and legalized income mechanism should be constructed for administrators, so that they can get a decent income that matches their work effort. Finally, the reform of the financial system should be deepened to deal with the financial relationship between the central and local governments and to give full play to the two positive aspects of the central and local governments. In terms of revenue, a more scientific local tax system should be constructed to match the ? the camp reform? implementation, improve the value-added tax (VAT) system, increase the share of local tax revenue, and improve the source of local revenue (which can also alleviate the dependence on land finance). In terms of expenditures, establish a system that more closely matches the authority and responsibility for expenditures, and appropriately strengthen the authority and responsibility for expenditures of the central government; under the premise of strengthening the rule of law and supervision, optimize the mechanism for the use of financial funds, improve the flexibility and scientificity of the use of funds by the local government, so as to mobilize the enthusiasm and initiative of its scientific investment, activate the financial deposits, and improve the efficiency of the implementation of fiscal policy. The construction of incentive-compatible mechanisms is the key to the implementation of fiscal policy in the next period of time, but also China's economic restructuring and upgrading as well as an important guarantee for the comprehensive construction of a moderately prosperous society.