The Rise of the Breathing Tax: China’s New Population-Based Revenue | Digging into ChinaSince 2022, China’s land sale revenue has plummeted, dropping from 7.8 trillion yuan in 2019 to a projected 2.26 trillion yuan in 2025, a 71% decline. This collapse, driven by a faltering real estate market and mortgage defaults, has crippled local government finances. Unable to rely on central government subsidies, authorities are shifting to population-based revenue, combining poll taxes via mandatory social security contributions with personal income taxes. Enforced through the hukou system, this “breathing tax” ensures stable revenue but reduces household income, stifling consumption and potentially suppressing population growth. Historically, China moved away from poll taxes through reforms like the Tang Dynasty’s Two-Tax System and Qing Dynasty’s abolition of population-based levies, which spurred population booms. The return of poll taxes signals an economic regression, threatening long-term stability.
