The Government Productive Expenditure, Tax Structure And Private Consumption Growth

China has been in a long-term state of depressed internal demand. To stimulate consumption and promote economic growth, the government has taken many measures such as increasing science and technology spending or increasing spending on education and other proactive fiscal policy, Even though government applied active fiscal policy, the effect seems to be insignificant.Many scholars researched the reasons from various angles and give the great inspiration for my paper. This paper analyze the financial reason of the slow growth in consumption from the perspective of the tax structure based on others’ research. Firstly, the paper admits that government productive expenditure will create crowding-in effect to consumer consumption by deriving classical macroeconomic model and meanwhile prove that tax structure influence this crowding-in effect, and then make the regression analysis of 30 provinces’ panel data from 1999 to 2014 to testify mentioned theoretical expectation above. Therefore, the paper believes that the ratio of indirect tax in China is too high to weaken the crowding-in effect. The high ratio of indirect tax is a nationwide problem. And the significant influence of each tax is different from the three areas. Above all, China should adapt and optimize tax structure based on the local reality to stop the present tax structure, which the indirect tax occupy the majority position, from hindering the increase of consumer consumption.