Abstract:Local revenue system, namely the local government revenue system, is the sum of all funds raised by provinces, cities, counties, towns and villages to perform their functions and its supporting systems and collection and management systems. Since the Third Plenary Session of the 18th Party put forward the new concept of “adapting financial powers to expenditure responsibilities”, optimizing the local income system has become the key task of future national governance. On the basis of reviewing relevant literature, this paper puts forward the optimization strategy of local income system based on the adaptation of financial powers and expenditure responsibilities, that is, on the basis of adhering to the basic principles of unified framework, focusing on people as the center, the main problems in the current local income system in China, such as the division of powers, the emphasis on local people’s livelihood powers, the unreasonable division of taxes, the excessive proportion of local resources operational income, the high dependence on non-tax revenue and the large gap in local revenue and expenditure, clarify the financial powers at all levels, clarify the expenditure responsibility and expenditure, improve the tax sharing system, and fill the local financial gap with transfer payment. Therefore, it is determined that the local income system in the new era consists of four parts: transfer payment, local exclusive tax income, appropriate non-tax income and compliance with local debt and other debt income. I hope to make up for the inadequacy of the research on the incompatibility between local financial powers and expenditure responsibilities, and optimize the local income system under the policy of “adapting financial powers and expenditure responsibilities” to provide a good theoretical support for the financial system reform.