Abstract
This chapter elaborates on why a real property tax is necessary, given that the real estate sector has become so strong in the country. If our answer to why China should adopt a local real property tax is “yes,” then what are the rationales? Since at least 2003, the academic and policy communities in China have debated this question without achieving consensus. This chapter offers an empirical analysis of the tremendous inequity and inefficiency of the current scheme of education finance in the absence of a local property tax. The analysis uses capitalization data of basic education and is based on micro-level housing data in central Beijing that illustrates how the differential treatment of tiered schools, coupled with school attendance by rigid proximity plus the household registration system, is the root cause of these problems.
This chapter is based on earlier work of my research team: (1) Hou, Ren, and Ma (2014) conference paper; (2) Hou, Ren, and Ma (2015) conference paper; and (3) Ren, Hou, and Ma (2017).
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Notes
- 1.
Living in a suburb of Chinese cities is associated with lower quality of education and less public services.
- 2.
Hospitals in China are ranked into three grades, from highest (III) to lowest (I), each with three steps, from A to C. IIIA is the highest rank. A IIA hospital can treat almost all common diseases and symptoms well.
- 3.
There is no information on homeowner’s income, educational attainment, race, or ethnic group.
- 4.
Some property sales are exempt from the business tax, and some are exempt from both the business tax and the income tax. Here, we know only whether the seller is exempt from at least one of these two taxes.
- 5.
We have data for distance to nearest park and number of bus stations nearby, but these are not significant.
- 6.
We have data for total number of floors in building and building model but do not use them here because of their strong correlation to “orientation: south-north” and total floor space, respectively.
- 7.
This truthfully reflects the punch of a popular saying in China that goes “Do not let your child lose at the starting line.” It may become more revealing if we link it to the recent American “tiger mom (from Asia)” phenomenon.
- 8.
We have data on the distance to shopping center and parks; however, the measures are blunt. We also have the number of bus stations within 500 m, but in a densely populated megacity with many bus lines, this variable is not significant.
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Hou, Y. (2019). Why China Needs a Real Property Tax? Empirical Evidence. In: Development, Governance, and Real Property Tax in China. Politics and Development of Contemporary China. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-95528-5_4
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