Rural tax reform and the extractive capacity of local state in China

Chinaʹs fiscal arrangement in the 1980s has preserved local governmentsʹ incentive but the 1994 fiscal reform recentralized revenues. Since then, farmersʹ tax burdens have risen steeply and become a major challenge to the state legitimacy. How to account for the huge regional variation? Why were some localities able to tax more heavily than others? Based on a national survey of village governance in China, we examine farmersʹ burdens empirically and identify political and social factors that explain the local governmentsʹ ability to tax farmers. This paper suggests that developments since the 1990s have shown that it overstates local discretionary power and does not pay enough attention to societal forces in understanding local public finance.