Abstract: Resident consumption plays a key role in smoothing the domestic economic cycle, and the content expansion and quality improvement of consumption determines the realization of the“dual economic circulation”to a certain extent. The optimization of tax system structure can affect the perception and understanding of the groups with different incomes and stimulate the consumption potential of urban and rural residents by changing the tax salience. Based on the theory of psychological account, this paper makes use of the data of 279 prefecture level cities in China from 2002 to 2020 to empirically analyze the impact of tax system structure on the consumption gap between urban and rural residents and its mechanism. The results show that the optimization of tax system structure can significantly narrow the consumption gap between urban and rural residents. The result of the heterogeneity analysis shows that, compared with corporate income tax, increasing the proportion of individual income tax can better reduce the consumption gap between urban and rural residents. Compared with the non-food consumption, the optimization of tax system structure can better narrow the gap between urban and rural food consumption. Compared with the under-developed cities, the positive effect of the tax system structure on narrowing the consumption gap between urban and rural residents is more obvious in the developed cities. The result of the mechanism analysis shows that the tax salience is an important mechanism for optimizing the tax system structure to narrow the consumption gap between urban and rural residents. Therefore, the content expansion and quality improvement of consumption need the strong support of tax system reform. The future tax system optimization should gradually increase the proportion of direct tax and improve the direct tax system. At the same time, full consideration should be given to the differential impact of tax system changes on the consumption psychology of the groups with different incomes, so as to better narrow the urban-rural consumption gap, thus promoting consumption and promoting the“dual circulation”.

Key words: tax structure, consumption gap between urban and rural residents, tax salience, direct tax, psychological account