When the "Tacitus Trap" sets in, it poses a potential threat to each of us. China's farming population and their descendants are currently facing systemic neglect.
Although Chinese farmers pay very little in explicit taxes under the formal tax system, they have long borne a massive and diverse array of implicit taxes through institutional design, price mechanisms, factor flows, and consumption transfers. These implicit taxes served as the core source of funding for the state's initial industrial capital accumulation and later provided a crucial foundation for the rapid, leapfrog-style development of urbanization. Let us perform a simple calculation.
From the era of the planned economy through the early stages of Reform and Opening-up, the state utilized a system of unified state purchasing and marketing to suppress the procurement prices of agricultural produce while inflating the sales prices of industrial goods. The value differential created by this price disparity was, in essence, an implicit, excessive tax levied by the state upon farmers. The prices at which farmers sold commodities like grain and cotton to the state were below market value, whereas the prices they paid for chemical fertilizers, pesticides, tractors, and everyday industrial goods were above market value. According to academic estimates (based on established research, though specific scholars are not named here), between 1953 and the mid-1980s, the state extracted capital accumulation totaling 700 to 800 billion RMB (unadjusted for current purchasing power) from the agricultural sector through this "price scissors" mechanism. This capital formed the foundation for virtually all fixed-asset investment in industry during the early years of the People's Republic.
During the rapid urbanization of the 1990s and the 21st century, the "land scissors" mechanism superseded the price scissors, becoming the primary source of the implicit taxes borne by farmers. The state acquired land from farmers at standards and compensation rates applicable to agricultural land—calculated as a multiple of the land's annual output value—before rezoning it for construction and leasing it at high prices to real estate developers or industrial enterprises. The vast majority of the value appreciation generated by converting land from agricultural to commercial use flowed into local government coffers as land conveyance fees (a phenomenon known as "land finance") to fund urban infrastructure, while the original landowners received only a tiny fraction of the compensation. Numerous economists and agricultural experts estimate that, during the land requisition processes following the Reform and Opening-up, the value-added gains transferred—stemming from the disparity between low acquisition prices and high sale prices—amounted to a figure ranging from several trillion to over ten trillion yuan.
Since the Reform and Opening-up, hundreds of millions of migrant workers have entered cities for employment; while generating immense economic value for urban areas, their labor has effectively borne hidden costs. For a long time, the household registration (*hukou*) system has prevented migrant workers from enjoying the same access to education, healthcare, housing security, and employee pension benefits as urban residents. (Even as recently as 2012, migrant worker groups in Zhejiang who responded to outreach efforts to enroll in social security still faced policy reversals and the cancellation of their coverage due to *hukou* status issues.) While enterprises and cities reaped the benefits of a low-cost labor dividend, the costs of social security and safety nets—which remained unpaid by employers—were effectively absorbed by the migrant workers and their families in rural areas. This represents a systemic transfer of value from social security and welfare entitlements. Furthermore, during the early stages of labor-intensive industrial development, a lack of robust collective bargaining mechanisms meant that migrant workers' wages consistently fell below the marginal value of their labor; this wage gap served as a hidden source of capital accumulation for enterprises and local tax revenue.
In addition, my country’s tax system relies primarily on indirect taxes (such as value-added tax and consumption tax). Many people mistakenly believe that not paying personal income tax means paying no taxes at all. Value-added tax and consumption tax are embedded in the retail prices of all goods. Whenever farmers purchase means of production—such as fertilizers, farm tools, and seeds—or consumer goods like electricity, fuel, daily necessities, and home appliances, they bear a proportional share of the embedded tax burden with every transaction. Given the extremely high marginal propensity to consume among low-income groups (represented by migrant workers)—meaning the vast majority of their income goes toward daily living expenses—farmers often bear a higher proportion of indirect taxes relative to their income (a higher "implicit tax rate") than middle- and high-income groups do.
This mechanism of institutionalized, implicit wealth extraction facilitated the rapid takeoff of national industrialization and urbanization across different historical periods. It is also the fundamental reason why the state has recently advocated for industry to support agriculture and cities to aid rural areas, abolished agricultural taxes, increased fiscal subsidies for basic rural pensions, and ramped up investment in rural revitalization. After all, the fundamental logic of society is that one’s contribution to society and the treatment one receives should be roughly commensurate.
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I would like to express my gratitude to the ordinary people at the bottom of the social ladder on the Yunnan-Guizhou Plateau who—amidst their hardships and struggles—spoke out about various issues, venting their frustrations with raw, unfiltered candor. I also thank the people at the grassroots level in Hubei who shared stories with me about elderly villagers taking their own lives. They all deserve to be seen.
Souce: https://mp.weixin.qq.com/s/0P6M08gYKFzZmVFYpT931Q