Simulation of Tax Incidence and Redistribution Effects of the Tax Proposal

  • Yilin Hou
Part of the Politics and Development of Contemporary China book series (PDCC)


This chapter takes the forthcoming adoption of the real property tax in China as a natural social experiment, estimating the potential ability and willingness to pay the property tax by Chinese urban households and simulating the tax burden distribution and the redistribution effect of the tax under several exemption proposals. The chapter uses a publicly available survey data set to calculate ability-to-pay indexes and willingness-to-pay measures; then, based on the indexes and measures, it conducts simulations. The results show that under the tax scheme proposed by authors of this book, the broad-base, low-rate local property tax is affordable to the great majority of homeowners, that low-income families get more net benefit than high-income families, and that this tax design is horizontally and vertically equitable, thereby politically acceptable; it is also efficient and administratively feasible. We can conclude that this design will generate adequate revenue to provide public services.


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Authors and Affiliations

  • Yilin Hou
    • 1
  1. 1.The Maxwell SchoolSyracuse UniversitySyracuseUSA

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