Transfer Payments,Tax Burden Of The Real Estate Enterprises And Labor’s Share Of Income

In recent years, with the development of economics, the factor income distribution in China is given more and more attention. When focusing on the factor income distribution, a fact that can’t be ignored is the significant difference among different industries. There’s a study which shows that in our country’s pillar industries, the labor’s share of real estate industry is in a backward position. The existing research on labor’ share of income are mostly concentrated in terms of elements, structure and organization. However, few researchers focus on the endogenous institutional roots.To explain this problem, this paper investigate the impact of the Finance transfer payment on the labor’s share of real estate industry and try to answer why the labor’s share of real estate industry in China is on a low level. Firstly, this paper analyzes the typical facts of the labor’s share of real estate industry, and confirms that there are differences among different industries and different sections. Further, this paper constructs a theoretical framework between the Finance transfer payment and the labor’s share of real estate industry. Firstly, the Finance transfer payment system in China is not standardized. The majority of transfer payments are determined by the local tax or ask the local governments to give matching funds. And these restrictions force the local governments to improve efforts on tax to gain more revenues, and then they can get more Finance transfer payments. Secondly, the original purpose of the Finance transfer payments system is to balance the Financial resources among different areas. The area is more undeveloped, the more transfer payments it gets, and it means the area is more lack of financial funds. Due to the expansion of the local fiscal expenditure pacing with the transfer payments, the local government also need to improve efforts on tax. Thirdly, because of the illiquidity of the real estate tax base, the local governments won’t reduce the effort on tax on the real estate industry. On the contrary, the local governments will improve the effort on tax to increase tax revenues because the main tax of the real estate is business tax. In such pattern of local governments’behavior, the enterprises of the real estate face to higher and higher actual tax rate. By building a profit function of enterprises of the real estate, this paper finds that the increase of actual tax rate will bring negative impact on labor’s share of income.Using the microcosmic panel data and Acemoglu channel identification method, the measurement results show:firstly, the transfer payments will bring negative impact on the labor’s share of the real estate. The more transfer payments the local governments get, the labor’s share of the real estate is lower; secondly, improving the real tax burden of enterprises is the important channel. The improvement of efforts on tax results in the increasing actual tax rate, and it means the improvement of government’s share, then relatively the labor’s share of income is being reduced; thirdly, the areas of different economic levels face discriminating impact of transfer payments. The higher economic level the area is on, the impact is weaker. No matter in east, middle or west section, improving the real tax burden of enterprises is always the important channel.