This paper explains the transformation process of the gap variety between Chinese city and country residents' per capita income during 1978 -2004 by establishing a Dynamical General Equilibrium Model.It also focuses whether tax rate can influence income gap.The result shows that,conditional on market clear,the endogenuous factor on narro- wing the gap between Chinese city and country' s per capital income is the industry economic crisis induced by industrial overproduction.Different tax rates on industrial production and agricultural production would influence the gap length and transferring velocity of city and country residents' per capita income.