By measuring the tax burdens for both Chinese urban and the rural households
in the 1990s, we find that the taxes on the urban households were mainly indirect taxes through
consumption of goods and services while those on rural households were largely direct taxes
such as state agricultural taxes, local fees and tuition. Although the incomes of rural households
were much lower than those of their urban counterparts, rural households were taxed much
more heavily than their urban counterparts. By calculating the total tax burdens for different
income groups of both urban and rural households, we find that rural tax in general was
much more regressive. The main reasons for rural tax becoming more acute in the 1990s
were the increasing rural income disparity and the uneven tax incidence biased against poorer
households. Policy implications are drawn for the ongoing rural tax reform, the rearrangement
of inter-governmental relationships as well as improving local governance in China.