It is regarded that the functions of property tax are to adjust wealth distribution as well as to inhibit housing price and to enrich the main category of local tax system. This paper uses microscopic data of CHNS household survey to estimate property tax revenue scale under different tax rates, and the results show that property tax revenue at present tax rate can not act as the main body of China’s local tax. System-GMM regression estimation with provincial panel data of 2004—2013 shows that the increase of real estate tax revenue of local governments can not inhibit housing price but can boost the transformation of local governments from the “being engaged in enterprise business” to “being engaged in city business” so as to obtain more financial interests by the development of the real estate industry. Therefore, the property tax, whether on scale or in logic, cannot be the main body of the local tax of China. To narrow the gap of wealth distribution is its only core function. Thus, China should have the tax system to collect property tax from those who have high income or who buy high-class houses and should control the proportion of property tax to local tax.