Abstract: The author believes that we must set up an income distribution system that addresses both fairness and efficiency in order to develop socialist market economy. For this end we should regard the process of income distribution in terms of a procedure of micro income distribution plus a procedure of macro income adjustment. During the procedure of micro income distribution we should emphasize efficiency, while during the procedure of macro income adjustment we should pay attention to fairness, that is, regarding efficiency as first priority and fairness as indispensable complement. Actualization of micro income distribution is through the function of market mechanics, and it is based on the micro income distribution that we carry out the macro income adjustment, which is supported by three measurements: income tax, transfer payment, and income guarantee system. Taking consideration of both efficiency and fairness requires that micro income distribution and macro income adjustment be combined so that efficiency and fairness can be applied to different procedures respectively.