Description/Abstract
As part of its turn towards domestic-led growth China plans to stimulate consumption, including through a reduction in consumption taxes. We compare two model-based scenarios in which the revenue losses from lower consumption taxes are replaced by higher income taxes or higher land taxes. The model is carefully calibrated to recent Chinese data, including detailed fiscal data. We find that higher income taxes lead to significant losses in output and incomes, while higher land taxes lead to significant gains. These gains are increasing in the share of land in net wealth, a statistic for which better data would be invaluable.
Document Type
Working Paper
Date
10-15-2025
Keywords
Domestic-led growth, land value taxes, consumption taxes, capital income taxes, labor income taxes, balanced budget, rents, unearned income
Language
English
Series
Working Papers Series
Disciplines
Economic Policy | Economics | Finance | Public Affairs, Public Policy and Public Administration | Public Policy
ISSN
1525-3066
Recommended Citation
Hou, Yilin; Kumhof, Michael; and Shao, Lei, "China’s Turn to Domestic-Led Growth: Replacing Consumption Taxes with Land Taxes?" (2025). Center for Policy Research. 510.
https://surface.syr.edu/cpr/510
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Included in
Economic Policy Commons, Finance Commons, Public Policy Commons
Additional Information
CPR Working Paper No. 276