The comprehensive real estate tax was created in the early days of the Roh Moo-hyun administration. In 2004, Deputy Prime Minister and Minister of Finance and Economy Lee Hun-jae was appointed as the new president. It started with the concept of a wealth tax. President Roh Moo-hyun placed an order saying that house prices would stabilize if punitive taxes were imposed on people living in expensive apartments in Gangnam, Seoul. Deputy Prime Minister Lee Hun-jae believed that it should not be overly radical. We also considered the burden of taxpayers and considered tax resistance.
That’s why the ‘personal taxation on houses exceeding 900 million won’ came out. At that time, there were not many houses that cost more than 900 million won based on the published price. In the first year, 36,000 people were subject to the real estate property tax, and the amount of tax was 39.1 billion won.
The property tax was implemented, but the house price was not set in 2005. At that time, the 386 rulers who controlled the Blue House forced Lee to resign as a land speculator in Gwangju, Gyeonggi-do. Next came the ‘August 31 measures’. The key is to significantly strengthen the property tax. The subject of taxation was changed to houses exceeding 600 million won, and the duty to pay the tax was changed to aggregation by household. In 2006, there were 235,000 people who were subject to tax, and the amount of tax increased rapidly to about 520 billion won.
The property tax was not a big issue during the Lee Myung-bak and Park Geun-hye administrations. This is because house prices did not rise significantly and the burden was eased by changing the system. What became a problem again was the arrival of the Moon Jae-in administration. Last year, it was 1.8 trillion won, and after 2007 it again exceeded 1 trillion won. This year, it jumped to 5.7 trillion won. The number of beneficiaries reached 947,000.
Is the estate tax a tax that will continue in the future? Many economists shake their heads. First of all, there is an ongoing debate about whether taxing unrealized profits is justified. It is the same wealth tax, but the comprehensive financial income tax levies a tax on financial income. There is another argument. double taxation. A property tax is a property tax that is levied on the house you own first and then levied again. There are constant criticisms that it is against the Constitution for these two reasons alone. It is for this reason that there is no slave tax system in foreign countries.
The bigger issue is the level of burden. Even if it is a wealth tax, resistance may be less if the level is not high. The maximum tax rate for single-homeowners is 3%, and 6% for more than two-homeowners in the area subject to adjustment. If you add the special tax for rural areas of 20%, it is 7.2%. If you have no other income, you will lose your house to the government in 14 years.
The figures show how much the tax burden has increased over the past five years of the Moon Jae-in administration. The number of subjects tripled from 332,000 to 947,000. The amount of tax increased 15 times from 380 billion won to 5.7 trillion won.
The government still protests that the tax is only levied on 2% of the population. Not only students and soldiers, but also infants are included in the denominator. The government is claiming that newborns are also subject to tax. If we replace the denominator with the person who owns the house, the percentage jumps to 6%. This is common sense. A punitive tax levied on 6% of taxpayers, this is the present taxation.
Next year, the target and scale of punishment will be much larger. So far this year, house prices have risen about 20%. Arithmetically, houses with a market price of 1.3 billion to 1.6 billion won, which are not subject to this year, will also be subject to taxation next year. In Seoul alone, one in four houses is subject to taxation.
In the United States, there has been a discussion about the wealth tax recently. The plan was to impose a tax on valuation gains on stocks, bonds, etc., on those with assets of more than $1 billion (about 1.18 trillion won). He said the number of participants would be less than 1,000. However, even this was in the process of being abolished due to controversy over its unconstitutionality.
Korea’s wealth tax is no longer a wealth tax. This is because it is levied on one in four houses in Seoul. It is time to call it punitive taxation on the middle class. Imposing excessive taxes on the middle class is unsustainable, and governments that neglect it are unsustainable.
