A Research For Function Orientation And Tax Credit Of Homestead Property Tax

House, as a special commodity, has both the nature of durables and the value of investment. Since the monetary reform of homestead, housing market gradually changed from a seller’s market to a buyer’s market. The increase of house supply solved the shortage of homestead in many urban families in China. However, because of the multiple economic and social properties of house, the local government’s dependence on land market and the unbalanced development of urbanization, since2000, house price in the urban area rose rapidly. The high price caused not only economic problems but also social problems. The difference in the value of house reflects the gap of wealth. The rich has more valuable houses and wealth accumulates with the rising of house price. But for the poor, it requires the whole family to pay for a single homestead. This phenomenon brings serious sense of deprivation and injustice to the poor. We need to solve this problem as soon as possible.Academia generally hopes that homestead property tax controls the price of real estate and becomes the main way to raise revenue for local government. However the low tax rate of homestead property tax can do little facing the rapid rising price of real estate. China’s urbanization brings a large number of people in the rural area to urban area. Limited land supply and great demand of homestead continues pushing the price of real estate. So homestead property tax does little help to control the price of real estate or curb the speculating of homestead. Structural reform of tax system in China reduced the revenues of local governments. It forces local governments to seek new means of raising revenue. Property tax is the best choice of local taxes. The tax rate of property tax is generally1.5%around the world. Considering the amount of real estate in the urban areas of China and tax credit, homestead property tax is able to bring approximately12%of tax revenue to local government, but it is much less than the amount that local government needed.No matter what is the goal of homestead property tax, promoting fairness is the primary orientation of it. Although the difference in the value of house reflects the gap of wealth, the homestead property tax may also mismatch the tax burden with income level, especially to the people with low income. This paper focuses on the design of tax credit. Take "circuit breaker" of America as a reference, ties the family income and cost of living to homestead property tax, set a cap to the tax burden of each income level, hoping to reduce and control the tax burden of low-income people. In this way, homestead property tax can be more targeted to narrowing the gap between the rich and the poor and promoting the income distribution more fairly.