ANALYSIS Real estate tax policy bordering on populism stunt
An apartment complex in Seoul. Korea Times file
The politically divisive issue to polarize public opinion
By Lee Kyung-min
Korea's two leading presidential contenders are reducing real estate tax policy to a populism stunt, in calculated moves fully aware of the political value of the highly divisive issue ― the chief failure of and cause for voter discontent with the Moon Jae-in administration.
Ways to raise or cut taxes on the rich are taking center stage in the discussion, whereas little attention is being paid to how best to increase the housing supply in areas highly sought after for safe and healthy living environments or to improve the quality of state-built public housing.
Voters galvanized by the emotionally charged issue of socioeconomic inequality between the haves and the have-nots are likely to be confused into thinking that electing either of the two will bring justice. Yet, the years of policy failures are certain to repeat themselves, unless the candidates understand that market expectations cannot be managed.
Lee Jae-myung, the ruling party's presidential candidate, floated the idea of imposing a tax on landowners, raising the effective tax rate to 1 percent, up from the current 0.17 percent.
The plan will lead to about 50 billion won in tax revenue to be redistributed to the bottom 90 percent of the public in what he has termed as a basic income.
Lee said that those who are not in the top 10 percent income bracket ― who generally oppose his plan for fear of losing their money ― are being manipulated by the media and corrupt political forces.
“Ninety percent of the public will receive more than they pay,” he wrote on Facebook, Monday.
Dividing the public into 10 percent against the remaining 90 percent is an approach similar to how his party is preparing new tax incentives for those in their 20s and small business owners.
The ruling party's youth committee is exploring ways to find tax exemptions for young people with annual incomes of less than 50 million won, given their low compensation relative to those in their 30s and 40s.
But this is facing criticism, since 7.06 million ― or 36.8 percent of the country's total 19.17 million salaried workers ― were exempted from paying income tax as of 2019, as shown by the National Assembly Budget Office.
All of those earning less than 10 million won in annual salary, and 85.6 percent of those earning less than 15 million won, were exempt from paying income tax.
Meanwhile, main opposition People Power Party (PPP) presidential candidate Yoon Seok-youl said that the Comprehensive Real Estate Tax, imposed on owners of homes that have officially appraised values of at least 1.1 billion won ($932,000), will be put under revision, Nov. 14.
“We will consider lowering the tax rate for owners of one home and introduce a system whereby senior citizens who have owned a home for a long period will be able to delay paying the tax until the property is sold or inherited,” Yoon wrote on Facebook.
The comprehensive real estate tax in his view is problematic no matter how few taxpayers are subject to it. Issues of double taxation, the violation of individual property rights, equality in taxation and the banning of excessive taxation remain unresolved. “The government should not be telling people to sell their homes if they do not want to pay hefty taxes,” Yoon said.
Both Lee and Yoon have said that they will supply 2.5 million housing units within their five-year term. Yoon plans to ease government rules to encourage the development and reconstruction of old apartments, whereas Lee seeks to build state-run apartments near subway stations.