JUST as we were expecting China's top lawmakers to approve a proposal to change the minimum income tax threshold to 3,000 yuan (US$460) from 2,000 yuan, they said they need to hold off a decision and solicit more feedback from the public.

The Standing Committee of the National People's Congress said the current proposal on the table, publicized on Monday, will undergo a second review that will include a public comment period lasting until May 25. The lengthy process and multiple reviews are a bit of a departure from usual policymaking process that happens much more quickly.

No wonder veteran market watcher Hu Shuli, editor-in-chief of Caixin magazine, said on her microblog at sina.com that a second review, or even a third one, was not beyond the realm of possibility. Quite reasonable, even, she noted.

The 120-billion-yuan proposed tax relief plan includes raising the minimum tax threshold and altering tax brackets to give relief to lower-income workers - a pledge made by the government in its 12th Five-Year Plan (2011-2015).

Under the proposal, 12 percent of salaried workers will pay income tax, compared with 28 percent now.

The longer the consultation process drags out, the more widespread are likely to be suggestions from a public trying to cope with rising costs of living.

As of yesterday, more than 175,780 people had logged on the lawmakers' website to air their views, and more than 385,000 microblogs on sina.com have also lent their voices to the debate. The last policy change that drew nearly as big a response from the public was the Labor Contract Law, and that elicited only 190,000 comments in one month.

So what kind of changes do people want to see in the tax laws?

The level of the threshold.

Many people think it should be higher than 3,000 yuan so that more benefit.

There is speculation that the drawn-out review process reflects divided opinions among members of the standing committees on whether the 3,000 yuan threshold is too low.

So there are hopes that a more generous threshold might finally be adopted in the end. It's hard to tell.

Paying no tax on the first 3,000 yuan of earned income annually isn't going to be much of a bonanza for most people living in high-cost, high-income cities like Shanghai. Some lawmakers are calling for the minimum threshold to be set at 5,000 yuan.

I did an informal survey among 10 of my friends, and all said the proposed increase was insufficient but better than nothing.

"I back those calls for a 5,000 yuan threshold," said Morris Gu, an office worker in Shanghai whose current pre-tax monthly salary is 7,000 yuan. "But in reality, I really doubt that will happen."

The view is widely echoed on the Internet, where skepticism abounds about whether the public consultation process is just a show and will have no bearing on the outcome in the end.

China has restructured with its tax system in the past to try to reduce loss of revenue as incomes rise. The 800 yuan individual income tax threshold set in 1980 was raised to 1,600 yuan in 2006, and increased further to 2,000 yuan in 2008.

Tax brackets

Lawmakers said the threshold is only part of proposed changes, and more focus should be placed on related issues such as changes in tax brackets.

China currently levies tax progressively on personal salary in nine brackets ranging from 5 percent to 45 percent. Under the proposal now being considered, the 15 percent and 40 percent brackets would be raised, and more people would be eligible to enjoy the 5 percent to 10 percent brackets.

However, at the top end, more income earners would find themselves in the maximum 45 percent bracket, triggering complaints that high salary earners and the middle class will carry the burden of tax reform which benefits the poor more.

Under the proposal, individuals whose salaries, excluding social welfare contributions, are 19,000 yuan or more would pay more tax. As an example, a person whose income is 50,000 yuan would pay an extra 600 yuan a year. At the other end, those who earn 5,000 yuan would save 200 yuan.

Ernst & Young partner Freeman Bu said the maximum 45 percent tax rate is too high and will make Chinese mainland cities less attractive to professionals.

It's not uncommon to hear high-salary earners complaining about China's top tax rate. Some private equity managers doing business on the mainland, base themselves in Hong Kong which enjoys a flat personal income tax rate of 17 percent.

Retooling the entire tax system

Some market watchers are calling for fundamental changes in the entire personal tax structure. There's talk that the tax code should be changed to allow income to be assessed on households instead of individuals. That would give families a per-capita leg up on paying taxes, a view that Caixin's Hu backs.

Instead of concentrating on salary earned, some suggest that the tax administration should be changed so that it considers an individual's overall financial obligations.

Joyce Xu, a Deloitte partner, said tax assessment should take into consideration an individual's age, family size, marital status and number of dependants to support.

People who care for elderly parents or children with disabilities should be allowed special deductions to reflect their higher costs of living, she said in a recent interview.

"China has a strong tradition of respecting family values and taking care of family members if they are in difficulties," Xu said. "This needs to be considered in the individual income tax system."

Spreading the net wider

With wealth being accumulated at an unprecedented pace in China, the source of wealth has become more diversified, with income from businesses, sole proprietorships and asset transfers. China's current tax regime is still focused on salary income. That's one of its perceived weaknesses. And the proposal makes no mention to change that as it focuses on the changes in taxable salary.

China defines taxable income as bonuses, lottery winnings and other income besides salary. But salary is the easiest to track and taxes are withheld even before net income reaches the pocket. Tracking incomes from sources such as home rentals or consulting fees is harder.

Then, too, wealthier people have the savvy and can pay accountants to take advantage of tax-avoidance loopholes - some legal and some not so.

Jia Kang, head of the Research Institute for Fiscal Science, Ministry of Finance, once quoted an anecdote that Zhu Rongji, when was he China's premier, asked tax authorities to check up on China's 10 wealthiest people and found they were paying almost no taxes.

"The super rich guys, mostly entrepreneurs who own their companies, simply don't pay themselves salary as such and thus avoid tax," Jia said in a television interview.

Small wonder that a lot of hard-working middle-class people grumble about the rich not paying their fair share.

Many people insist that the tax collector's hand be strengthened, and that electronic tracking methods used in the United States, UK and other developed countries be adopted to keep tabs on income.

Zhu Yongxin, a member of the Standing Committee of the NPC, suggested a system linking a person's identity card information - which is quite extensive - with the tax administration's computers.

Everyone seems to agree that the tax system should be fairer. But Rome wasn't built in a day. Will all of these ideas be incorporated into the next revision of the tax-change proposal? Probably not. One problem with opening the Pandora's box of tax deductions is that every special interest group will seek one, creating a system full of all kinds of exemptions and loopholes. China must be careful that its tax policies don't get ahead of the system's ability to monitor, or what may seem like inequities now will simply be compounded.

But at least China is embarking on the right road in focusing the spotlight on the tax system and soliciting the public's views about ways it might be improved.

"It's human nature to duck tax as to duck death," Liu Shangxi, deputy head of the Research Institute for Fiscal Science, Ministry of Finance, said on his microblog. "It's natural to see people wishing for less tax or even no tax, with a tax threshold of 5,000 yuan or even 8,000 yuan. But for the government, it needs to find a balance between expenditure, tax revenue, and debt based on reasonable thinking."

One consensus is clear: Taxes are a device of social engineering, a way to reallocate society's wealth for the benefit of the public at large. Trying to arrive at "fairness" is always fraught with complications.

The risk for the government in letting this process go on too long is that public consensus may not be in sync with its decision.