[Viewpoint]Move forward, cut taxesWith the launch of a new administration ahead, there has been a lot of talk about tax cuts. Since announcing that “economic recovery” will be the primary focus of the new government, the new administration needs to present policies that grab the people. The best way to do that would be to cut taxes. That would touch people’s hearts and would fit perfectly with the new administration’s slogan of “economic recovery.”
There is also the successful case of “Reaganomics” in the United States to consider. President Ronald Reagan’s tax cuts led to an increase in investment and spending, which led to economic revitalization, more sources of tax revenue and ultimately an increase in tax revenue.
Some argue we should apply this formula to our country, too. The fact that an additional 13.7 trillion won ($14.6 billion) was collected last year in taxes than originally expected adds momentum to the argument.
But for some reason, President-elect Lee Myung-bak is hesitating to specify any tax cuts. The potential areas for cuts that have been mentioned include the gasoline tax, the capital gains tax and the corporate tax for small- and medium-sized enterprises. Cutting the gasoline tax would help average-income people, cutting the capital gains tax would make it easier to buy and sell homes and cutting the corporate tax would benefit small- and medium-sized enterprises. However, the scope of the tax cuts under discussion is far from extensive, though Lee promised they would be used to vitalize the economy.
In other words, because the president-elect promised to cut taxes, he should do so, but at this point it’s hard to see what effect they will have. Lee says he will review the comprehensive real estate tax, which has drawn the most complaints, after the second half of this year. He wants to watch the movement of the real estate market and consider gradually reducing the corporate tax for large companies during his term.
The people who voted for the new president because of his pledge to cut taxes might be feeling very disappointed. But making a pledge is one thing; running state affairs is quite another. Even though he promised to reduce taxes, he cannot help but see things differently now that he will be responsible for the administration of the nation.
Sound and solid management of finances, the national coffers, is a major part of state affairs. The country will go bankrupt if the keeper of the national coffer spends freely. The qualification of the keeper does not lie in his generous heart, but his ability to manage the national finances with economy and thrift.
In fact, no policies impress the people as much as tax cuts. Our tax system looks like patched clothes. There are as many as 226 tax exemptions and reductions that are available under some pretext or another. This is all due to tax cuts, a little bit here and a little bit there. It is almost impossible to raise taxes once they are decreased. Give some bread to a child, then try taking it back. Cutting taxes is exactly like that.
Tax exemptions seldom disappear once they come into being because of fierce resistance from interest groups who benefit from them. The Roh Moo-hyun administration experienced harsh criticism because its tax estimates were low.
The administration upset many voters by introducing the comprehensive real estate tax, saying it would control the housing prices.
President Roh’s playful comment, “Let’s see what happens after people pay the taxes or let me see if they can endure not being able to sell their houses” clearly showed how lightly he treated the taxes people pay.
He raised the issue of increasing taxes to expand the nation’s welfare system, then lost in the local elections. Handling taxes poorly can be fatal to administrations.
It is hard to raise taxes but also hard to decrease them. In this regard, fortunately, the new government is seemingly taking a prudent stance toward tax reduction. If the new administration intends to improve the tax system, it is more important and urgent to correct the tattered tax system. The comprehensive real estate tax should be fundamentally re-examined to set the country’s tax system straight, not as a real estate measure.
In addition, I hope the National Tax Service will not show any unnecessarily notable gestures due to the power shift. Taxation is just a part of routine administration. There shouldn’t be special business-friendly taxation, since the agency has not applied any anti-business taxation so far.
*The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo