Taiwan’s Increasing Income Polarization: Global Pay and Local Pay

Income polarization in Taiwan will become increasingly pronounced. In the future, 50–70% of people in Taiwan will pay no income tax. The top 30%, or even the top 5% or 10%, could support the entire income-tax contribution. Revenue will not decline simply because only 10–30% of people pay tax: the top 30% remain on a high-growth trajectory and may earn more and more in the future, naturally paying more tax as well. Even if the number of taxpayers falls, collections can still exceed the government’s budget estimates, as they have in recent years. Most of the contribution comes from this small group at the top. 0.13% of people pay 17.47% of Taiwan’s income tax. 0.85% of people pay 41.19% of Taiwan’s income tax. 2.79% of people pay 60.75% of Taiwan’s income tax. 7.66% of people pay 77.21% of Taiwan’s income tax. A small group in Taiwan—around 10% of the population—is on a high-growth trajectory amid globalization, AI development, and U.S.–China confrontation. Their income is Global Pay. Because they remain on that trajectory, they can be expected to earn more and more. But a much larger group in Taiwan earns Local Pay, mainly in domestic service industries or traditional industries competing intensely with China. Their income growth may be limited, stagnant, or even persistently negative. High earners drive inflation and increases in goods and housing prices. Government therefore needs tax and subsidy measures to support disadvantaged groups that have not kept pace with globalization and AI. They may feel that the past decade’s economic growth has had nothing to do with them, yet keenly experience the inflation accompanying it, creating a sense of relative deprivation.