How to empower migrant workers with citizen social rights？ This is a critical issue in reforming China's Household Registration System （HRS）. Recently， the discourse of citizen social rights is not only dominating the academic discussion on HRS， but has been officially accepted in the government documents. For instance， Opinions on Further Promotion of the Reform of Household Registration System，issued by the State Council in July 2014， explicitly recognizes ″protecting citizens' rights and interests according to the law″ as its main goal. In practice, however, local governments retain household registration barriers for migrant workers and prevent them from gaining full access to public services and social welfare. How to explain local governments' behavior of replacing ″entitlement″ with ″eligibility″ in HRS reform？ Current studies tend to explain migrant workers' lack of social rights as a problem of government accountability and responsiveness. They argue that migrant workers are incapable of influencing public policy under the current political system， while the HRS is still playing an important role in maintaining social stability and promoting economic development. Without external pressure and internal motivation， local governments are unwilling to change the status quo. However， this argument is not sufficient to explain local governments' selective social rights safeguarding， as they are willing to provide full public services and social welfare to local peasant workers， but not to migrant workers． Based on a combination of empirical study and institution analysis， this paper argues that the taxation system and the public service provision system are the important institutional foundation of local governments' selective social rights safeguarding. After China's decentralization reform in 1980s， local government has become the main fund-raiser for public service and social welfare of its local residents. Thus， its expenditure will increase significantly when the number of local residents grows. Meanwhile， local fiscal revenue has a weak correlation with its population under the current taxation system and local government does not have the authority to adjust its taxation rate. Under this circumstance， local government begins to use the HRS to control the number of residents who are eligible for public services and social welfare so it can keep the expenditure within the limits of its income． To conclude， the HRS reform is not only a philosophical issue of political value， but also a practical challenge of social rights safeguarding. It is not only related to local government's incentive， but affected by local government's capacity as well. Thus， the HRS reform shall go beyond the discussion of citizen social rights and value the importance of building a local public economy， within which local government's fiscal revenue will change according to the local population.