The Effects On Cities’ Public Finance Exerted By Real Estate On The Background Of Building Taxes Reform

Nowadays, the reform of house property tax has been given priority by the administration. In 2011, the experiments of this reform have been conducted in Chongqing and Shanghai. For the vital role in inhibiting speculating investments in real estates, narrowing the gap of wealth, and adjusting the administrative power relation between central and the locals etc., this reform is expected to continue smoothly without much resistance. However, for some cities whose fiscal revenue mainly comes from land transaction, how to ensure their fiscal income not to decrease sharply? There is survey that about 4 cities out of 43 cities, whose land revenues outweigh general budget revenue, while 8 cities are only 40%. Therefore it is necessary to analyze specifically the degree of dependence on land revenue in different cities.The main purpose of this paper is to find the relations between fiscal revenue and real estate’s investments. When finding the proper group variable will be our first task, the dependence on real estate and the house price are available after reviewing the former related studies. Hence, we also need to set the regression model. This paper is based on the Cobb-Douglas production function as the prototype, when selecting real estate investment as the main explanatory variables, the urban population growth, financial market development, labor market conditions, prices, GDP growth as control variables, and fiscal revenue and fiscal surplus as explained variable. What’s more, Source of data is the key to the empirical test, this article selects 34 large and medium-sized cities in 2000-2010 as the panel data, including finance, employment data originated from the national bureau of statistics, statistical yearbook, etc., which provided the safeguard for the empirical conclusions of this paper.Through the qualitative and quantitative research, the conclusions are developed as follows. First, the increase of real estate investment can promote urban fiscal revenues, but the cities dependent on fiscal revenue heavily are affected by the fluctuation of the real estate market seriously than low dependence cities. Specifically:for cities of high fiscal dependence,1% increase in real estate investment can lead to 0.19% increase in fiscal revenue; while for cities of low fiscal dependence, every 1% increase in real estate investment can lead to 0.05% increase in fiscal revenue. Second, the high price group is 2 times than the low prices group in terms of the effect of real estate investment on the fiscal surplus. Specifically, for the cities with high prices,1% increase in real estate’s investments is able to decrease the fiscal revenue by 0.376%. In cities with low house price,1% increase in investments will increase the fiscal revenue by 0.178%.Third; surprisingly the real estate will increase the urban fiscal deficits, in general, every 1% increase in real estate investment will reduce urban fiscal surpluses by 0.26. This effect in high dependence group is four time than in low dependence and in high price group is 1.5 times than in low price group.