Foundations of Tang Economic Policy

The Tang Dynasty (618–907 CE) inherited and refined earlier systems of land distribution and taxation, most notably the Zu-Yong-Diao (租庸调) system. This framework, rooted in the Northern Wei Dynasty’s Jun Tian (均田) or “Equal Field” system, aimed to balance state revenue with peasant welfare. Unlike the ancient Jing Tian (井田) well-field system—where land was tied to feudal lords—the Tang’s approach centralized control under the imperial government.

Key principles of Zu-Yong-Diao:
– Zu (租): A land tax set at 1/40th of harvests, lighter than the Han Dynasty’s 1/30th rate.
– Yong (庸): Labor service, reduced to 20 days annually (down from 30 in Han times).
– Diao (调): Tribute of local textiles (silk or hemp), echoing Confucian ideals of equitable burdens.

The system’s brilliance lay in linking taxes to household viability: land (Zu), labor (Yong), and home production (Diao) formed an integrated economic cycle. By ensuring families had land to farm, the state guaranteed stable revenue while minimizing hardship—a “light corvée and low tax” (Qing Yao Bao Fu) model praised by scholars.

The Collapse of the Household Registry System

The Zu-Yong-Diao system relied on meticulous census records (Ji 籍) and labor logs (Zhang 账). Local officials updated registries annually (for labor) and triennially (for households), with copies sent to prefectures and the central Ministry of Revenue. However, maintaining accuracy proved daunting:
– Administrative decay: Over time, registrars neglected updates—failing to remove deceased persons or add new adults.
– Elite resistance: Powerful clans hoarded land, undermining equitable distribution.
– Logistical limits: Pre-modern communication and record-keeping tools (e.g., expensive paper) hampered enforcement.

By the mid-8th century, discrepancies rendered Zu-Yong-Diao unworkable. The state could no longer track land allocations or labor obligations, prompting a radical shift.

The Two-Tax Reform of 780 CE

Chancellor Yang Yan (杨炎) introduced the Liang Shui Fa (两税法, Two-Tax System) under Emperor Dezong, restructuring Tang economics:

Key Changes:
1. Tax Basis: Shifted from per-capita levies to wealth (landholdings). Migrants paid taxes where they resided (“households without distinction between host and guest”).
2. Payment: Taxes were collected in cash (not grain), aligning with commercial growth but exposing peasants to market fluctuations.
3. Fixed Quotas: Annual revenues were pegged to the 779 CE benchmark, ignoring demographic changes.

Consequences:
– Regional inequality: Depopulated areas (e.g., Weinan County) faced heavier burdens as taxes were split among fewer households, accelerating decline.
– Land concentration: Abandoning land redistribution enabled unchecked mergers, creating a landlord class.
– Monetization woes: Farmers sold crops at low prices to meet cash taxes, while officials often demanded payment in undervalued silk—a “hidden doubling” of burdens (as critic Lu Zhi 陆贽 noted).

Cultural and Economic Legacy

The Two-Tax System marked a watershed in Chinese fiscal history:
– End of egalitarian ideals: Unlike the Zu-Yong-Diao’s emphasis on equitable land access, the new policy prioritized revenue stability over social equity.
– Urban-rural divide: While commercial economies grew, rural smallholders—the backbone of Confucian society—faced decline. Yet the system endured for over a millennium, adapting through later dynasties.

Comparative Perspectives:
– Tang vs. Han: The Tang’s early focus on preventing poverty (via land grants) contrasted with the Han’s restraint of wealth (via salt-iron monopolies). However, both systems unraveled due to military spending—Tang expansionism and An Lushan’s rebellion (755–763 CE) mirrored Han struggles with Xiongnu wars.

Modern Reflections

The Tang’s transition from Zu-Yong-Diao to the Two-Tax System reflects timeless governance dilemmas: balancing equity with efficiency, and adapting institutions to changing realities. Its legacy—a shift from state-led welfare to market-driven taxation—prefigured debates still relevant in agrarian and developing economies today.

In essence, the Tang’s reforms were not merely fiscal adjustments but a redefinition of the state’s relationship with its people—one that traded ancient ideals of fairness for administrative pragmatism, with lasting consequences for China’s economic trajectory.