The Fiscal Predicament of Local Governments

November 2, 2011

Rural Tax Revolts in 1990s

1980s: decollectivization means rapid rise in rural incomes 1990s: Local fees and charges burden farmers particularly in central China Rural urban income gap widens: 1:2.57 in 1978; 1: 1.86 in 1985; 1: 3.11 in 2002 Petitioning and violent protest

Describe the Process of Making the Tax for Fee Policy

Describe the Process of Making the Tax for Fee Policy

Sense of urgency Top town (Agriculture and Finance) Cut size, waste, corruption of local govts (scapegoating) Make cuts a veto target in cadre assessment Abolish ALL fees, ALL taxes Monitoring problems requires blanket abolition, no fine tuning (all thumbs, no fingers) Locals reduce taxes and center approves Transfers compensated provinces but not counties and townships which simply cut services

Fiscal Pressures on Local Governments

Transfers inadequate to cover mandates Cant tax or use fees Land sales and development are the solution Underfunded public goods Starving the township

Land Requisitions Have Become Main Complaint of Protestors

Where are protests concentrated?