The fishing capacity and capacity utilization for Chinese inshore fleets over the latest 13 years were measured using the DEA method. Relevant models were then established to analyze the relationships between capacity output, capacity utilization, and income, and the function of collecting taxes to control fishing capacity was quantitatively simulated. It was pointed out that the tax system would be effective for curtailing fishing capacity and improving the efficiency of the entire fishing industry in China, provided that the tax rate is not too low. Finally, it was suggested that collecting taxes at a proper rate be implemented for Chinese inshore fishing fleets.