Abstract:Property income has become a significant factor to widen the gap between the rich and the poor in China. As one of the main redistributive tools,tax policy of the property income should be designed effectively to readjust excessively high individual income. This paper innovatively introduces personal capital productivity to describe the capital accumulation of different people and corresponding potentials of capital gain. Meanwhile,this paper uses political inequality to reinvestigate the Meltzer-Richard model of equilibrium tax rates,and develops a theory that links higher capital productivities to higher social status using one privileged and one non-privileged group as examples. The experiment varies the converting rules used to decide the implemented tax rate. We find that our revised model fits the data better and conforms to the external validity better. This paper provides a possible explanation for the failure of the current redistributive policies. Overweighting the demand of the privileged group will lead to lower property income tax rate,which is in contrast to the policy intention. However,there is also a tradeoff between fairness and efficiency,higher tax rate reduces the overall capital output.