Abstract: With in the framework of New-Keynesian Economics, this paper studies the impact of tax policies on macroeconomic fluctuation in China. When DSGE Models are applied to analyze tax-sharing system, both national and local tax polices based on China’s reality have been taken into full consideration. The study comes to the conclusion that direct impact of national tax policies will reduce output and restrain excessive economic growth in the short term. In the contrary, the direct impact of local tax policies will create more jobs, boost economic growth and restrain inflation in the short run. In addition, macro-economy is more sensitive to the direct impact of local tax policies. Therefore, local tax policies should play a greater role in macroeconomic regulation.The research of this paper provides the theoretical evidence of the direction of the new round of tax reform and the quantitative reference of the specific operation.