The influence of the transfer payments from the central government to the local governments on the local governments’ efforts on taxation must be taken into consideration by every country for the design of the transfer payments. Based on the theoretical analysis on the influence of the transfer payments from the central government to the local governments on the local governments’ payments, this paper indicates that the local governments’ efforts on taxation depends on the demand elasticity of the district for public goods. It increases with the increase of the elasticity X. Judge the degree of the local government’s efforts on taxation by measure X. After an empirical analysis on the transfer payments from the central government to the local governments from 2000 to 2004, this paper gets the conclusion that the local governments’ efforts on taxation abates with the increase of supporting payments or with the increase of the ratio of transfer payments to local willing public payments. Under specific circumstances, the higher the ratio of transfer payments to the local fiscal expenditure is, the smaller the local governments’ efforts on taxation is under the central payments, whereas the higher the local income is, the higher the efforts is under the central payments. Based on this, this paper gives the meaning of its corresponding policies. The influence of the transfer payments from the central government to the local governments on the local governments’ efforts on taxation must be taken into consideration by every country for the design of the transfer payments. Based on the theoretical analysis on the influence of the transfer payments from the central government to the local governments on the local governments ’payments, this paper indicates that the local governments’ payments, on the taxation depends on the demand elasticity of the district for public goods. It increases with the increase of the elasticity X. Judge the degree of the local government’s efforts on taxation by measure X. After an empirical analysis on the transfer payments from the central government to the local governments from 2000 to 2004, this paper gets the conclusion that the local governments’ efforts on taxation abates with the increase of supporting payments or with the increase of the ratio of transfer payments to local willing public payments. Under specific circumstances, the higher the ratio of transfer payments to the local fiscal expenditure is, the smaller the local governments ’, the smaller the local governments’ efforts on taxation is under the central payments, the higher the local income is, the higher the efforts is under the central payments Based on this, this paper gives the meaning of its corresponding policies.