China will completely eliminate agricultural taxes on its famers over the next 5 years, even though 28 of 31 provinces have already done so. Deng Xiaoping first cut taxes on peasants in 1979, instituting a small quota that went to the government but allowing peasants to keep all additional output. Under this "household responsibility system," the marginal tax rate on farming was thus zero, and after decades of chronic "famine," Chinese agriculture boomed. Over the last decade, however, many local officials across the country had begun charging fees and taxes on farmers, leading to widespread rural unrest or at least frustration. Now Beijing will continue Deng's tradition of low tax rates that has been fundamental to the nation's 27-year boom.
-Bret Swanson
