How China Is Rolling Out a Property Tax on Homes, and Why

The history of private home ownership in Communist China is short, only a couple decades or so. But prices have skyrocketed so quickly that it now has some of the world’s most expensive housing markets. That’s widening the country’s wealth gap and leaving many people, particularly the young and poor, out in the cold. Now, amid a broad effort by President Xi Jinping to promote “common prosperity,” authorities are inching ahead with long-debated plans to start taxing some residential property owners, partly to deter speculation and partly to address social inequality. Such a reform could have far-reaching implications for the country’s 300 million-strong middle class.

There’s an annual tax on commercial property but not most residential assets. Instead, local governments earn much of their revenue from land sales -- 8.4 trillion yuan ($1.3 trillion) last year, compared to 10.1 trillion yuan from other sources including sales taxes and personal and corporate income taxes. So they resist any measures that could suppress real estate values.