Between 2017 and 2019, China implemented an unprecedented value-added tax (VAT) rate cut policy. With the significant reduction of fiscal revenue that acts as a guarantee for the government, will this affect the issuance spreads of municipal investment bonds? Municipal investment bonds are an important financing tool for local governments. In the face of the tax cut shock, will local governments take credit enhancement measures to offset the impact of the tax cut shock? Based on the VAT cut points, this paper constructs the tax cut shock variables at the prefecture-level city level, combined with the issuance data of municipal investment bonds, and finds that the tax cut shock does not improve the issuance spread of municipal investment bonds, but reduces its issuance spread. The main reason is that the local government, faced with the tax cut shock, will provide credit-enhancing effect for local government financing vehicles (LGFVs) through land regulation, which has two specific measures: (1) Injecting or granting commercial and residential land to local government financing vehicles (LGFVs) to enhance its financing capacity; (2) Increasing the transfer price of commercial and residential land to enhance the collateral value of the land and improve the credit level of local government financing vehicles (LGFVs). At the same time, the adjustment of land grant revenue and structure has not been obvious, suggesting that at this stage, the operation of “land for development” is gradually shifting from land finance to land financialization. This paper contributes to the existing literature in two aspects. Firstly, we construct tax cut shock variables by considering industrial structure, tax reduction points, and policy timing, thereby providing a more scientifically rigorous examination of the economic effects of tax cut shocks. Secondly, we incorporate the response behavior of local governments in terms of land transfer into the analytical framework of the impact of tax cuts on the pricing of municipal investment bonds. This provides a reasonable explanation for the “abnormal” phenomenon that tax cuts have caused the spreads of municipal investment bonds to fall and offers new empirical evidence to improve the understanding of the mechanism linking local internal-budgetary and external-budgetary funds. Given the inadequacy of the traditional fiscal perspective in fully elucidating the persistent escalation of local government debt in China, this study adopts a lens centered on local land regulation. By capitalizing on the large-scale value-added tax cut policy from 2017 to 2019, it examines how local governments, confronted with fiscal pressures, employ land resource regulation to bolster the credibility of municipal investment bonds, thereby influencing the pricing of municipal investment bonds. The research in this paper not only provides new evidence for the existence of implicit guarantees for municipal investment bonds, but also provides useful policy insights for improving tax reduction policies, actively promoting the market-oriented transformation of local government financing vehicles (LGFVs), and preventing local governments from overly relying on land.