By Yoon Ja-young
The tax burden on the middle class has grown rapidly, a survey showed Monday.
According to the 2014 survey by Statistics Korea, households that account for the top 40 to 60 percent in income, the so-called middle class paid 83,385 won in monthly taxes last year, which is an 18.8 percent increase from the previous year.
The survey used direct taxes such as earned income tax and property taxes.
Those in the top 20 percent income bracket, meanwhile, paid 380,332 won in taxes, up 3 percent from a year ago. Their tax burden increased at the same rate as the low income households.
The bottom 20 percent in the income bracket paid 24,793 won, up 3.1 percent from a year ago.
Those between the 20 and 40 percent in the income bracket saw their tax burden increase by 4.4 percent.
These statistics are adding to the grievances of the middle class who have complained that the government is squeezing them for the benefit of businesses and the better-off.
The previous Lee Myung-bak administration lowered the corporate tax rate to 22 percent from 25 percent in 2009, to enhance competitiveness in the business sector.
Choi Seong-keun, a senior researcher at Hyundai Research Institute, said the quality of life has worsened for the country’s middle class during the past decade.
“Though the per capita income has neared $30,000, the ratio of the middle class has been decreasing. Concern is increasing over the ‘crisis of the middle class,” he said.
Choi said that while the total income of the middle class increased by an annual 7 percent between 1990 and 2013, the steep increase in housing costs and education spending has worsened the household economy.
Their average monthly income stood at 3.8 million won as of 2013, marking an average 7 percent growth annually from 820,000 won in 1990.
Their average spending for a “jeonse” deposit, Korea’s unique housing rent system, meanwhile, jumped by an annual 11.8 percent to 117.1 million won from 8.9 million won in 1990.
This means the country’s middle class have to save all of their disposable income for three years to rent a house on jeonse.
The huge education burden is also weighing heavily on them.
The spending on education took 20.9 percent of their total consumption in 2013, compared with 13.4 percent in 1990.
Their ratio of spending on leisure and cultural activities, meanwhile, dropped by 0.6 percentage points to 5.3 percent during the same period.
“To enhance the quality of life for the middle class, it is crucial to ease their excessive spending burden,” Choi said.
“Among the Organization for Economic Cooperation and Development (OECD) member countries, Korea’s fiscal policy is the least effective in increasing the middle class through income redistribution.”