Lee Jae-myung, leader of the Democratic Party of Korea (DPK), has stepped back from his proposal to provide “250,000 won per person to all citizens for livelihood support,” and requested a meeting with President Yoon Suk-yeol, stating, “If universal support is challenging, we are open to considering differential support.” The decision, following the acceptance of the pension reform plan, seems aimed at reinforcing the image of the party as a responsible governing body. Within the DPK, there are even moves to ease the comprehensive real estate holding tax, previously opposed as a “tax cut for the wealthy.” Regardless of the intentions, it is noteworthy that the main opposition party, which dominates the National Assembly, is showing a realistic stance on some policies, moving away from outdated political logic.
The proposal to distribute 13 trillion won, or 250,000 won per person, was never intended as a livelihood policy but as a vote-buying pledge for the general election. Distributing cash to the entire population during a time of high inflation and interest rates is almost unprecedented globally, and it has never happened in our history either. The DPK, having found success with COVID-19 relief funds, continues to use cash handouts as an election strategy, which is concerning. While Lee and the DPK argue that the policy aims to boost the economy through income support and consumption recovery, the current economy shows growth driven by strong exports. The Bank of Korea has even raised this year’s growth forecast from 2.1% to 2.5%. Injecting 13 trillion won into the economy during high inflation could exacerbate price increases. Support for livelihoods should be focused on vulnerable groups, and one-off cash handouts should be avoided. The DPK must move away from populism to build trust as a party of rational policies.
The movement within the DPK to reform or abolish the comprehensive real estate holding tax is noteworthy. Introduced by the Roh Moo-hyun administration in 2005, the tax is a “political tax” unique to South Korea among major global economies. It is double taxation, following property tax, and has a punitive nature with a top rate of 5%. As many experts have pointed out, it is necessary to consider abolishing the comprehensive real estate holding tax and unifying the holding tax with the local property tax.
If the DPK intends to reform the comprehensive real estate holding tax, it should also work with the government’s corporate value-up program to discuss measures to overhaul other tax systems, such as the world’s highest inheritance tax and dividend income tax, which contribute to the Korea discount. There is reportedly a growing consensus within the DPK on the need to ease inheritance taxes. It is also urgent to address the financial investment income tax, which concerns 14 million stock investors.
When the 22nd National Assembly opens, a bipartisan task force on livelihood measures should be established to discuss alternatives to the “250,000 won per person” proposal, and a special committee on tax reform should be formed to seek solutions for issues such as the comprehensive real estate holding tax, inheritance tax, dividend income tax, and financial investment income tax. The pension reform, semiconductor support law, radioactive waste site law, and low birth rate law, which were abandoned by the 21st National Assembly, should also be reconsidered immediately.
