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The Potential and Utility of Land Value Taxation: A Theoretical Framework and Simulation for China

Author

Listed:
  • Yilin Hou
  • Michael Kumhof
  • Lei Shao

Abstract

This paper develops an analytical framework for examining land taxation in the context of contemporary urban economies. We dissect the China case for simulation, comparing two model-based scenarios where revenue losses from consumption taxes are replaced by higher income taxes and land taxes. We calibrate the model to year-2015 data and find that higher income taxes cause large losses in output and income, while higher land taxes lead to substantive gains that increase with land share in net wealth. This paper offers empirical explorations in revitalizing the land tax, with simulation results at a large country level for generalization.

Suggested Citation

  • Yilin Hou & Michael Kumhof & Lei Shao, 2026. "The Potential and Utility of Land Value Taxation: A Theoretical Framework and Simulation for China," CESifo Working Paper Series 12476, CESifo.
    • Handle: RePEc:ces:ceswps:_12476
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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