Lee’s tax cut plan losing support of GNP lawmakers

Fifty days into the Grand National Party’s internal discord over the Lee Myung-bak administration’s tax policy, the president’s strategy to cut taxes for high-income earners to boost the economy appears to be losing momentum as a majority of the ruling party lawmakers expressed their intention to back off from the controversial proposal, a JoongAng Ilbo survey showed yesterday.

The JoongAng Ilbo conducted a telephone survey yesterday of 137 Grand National lawmakers out of the party’s 171 representatives. Only 26 lawmakers said they support the current tax policy, while 100 lawmakers wanted an alteration to avoid the criticism that the party only caters to the rich.

The plans to trim income and corporate tax rates were sponsored by the Lee administration and the ruling party last December to encourage investments and boost the economy. The opposition Democratic Party fiercely opposed the policy, arguing that only the rich would benefit.

While the government wanted immediate tax cuts, ruling and opposition lawmakers reached a compromise that the income tax rate for the highest bracket would be cut from 35 percent to 33 percent, but not until 2013. The two-year delay was also applied to a planned corporate tax cut. The 22-percent rate for companies with more than 200 million won ($176,843) in taxable profits would be cut to 20 percent starting in 2013.

Tax rates for middle and low-income classes and small companies, however, would be trimmed starting this year.

Seventeen Grand Nationals, including Representative Chung Doo-un, who first sparked the internal conflict on Sept. 30, said the ruling party must retract its support for both plans to cut the income tax for the highest earners and the corporate tax for conglomerates.

While the 17 lawmakers wanted the complete withdrawal of plans dubbed as “a tax cut for the rich,” 55 lawmakers backed a compromise proposal of former GNP Chairwoman Park Geun-hye. The party rival of President Lee said she wants to keep the corporate tax cut, but withdrew support for the income tax cut for the highest bracket.

Those backing Park’s plan are not only her loyalists but also some pro-Lee lawmakers, including former GNP Chairman Chung Mong-joon and Secretary General Won Hee-ryong.

A group of 28 lawmakers said they supported an alternative, proposed by GNP Chairman Ahn Sang-soo. Ahn has presented a plan to create a new income bracket in order to lower the number of rich people to be affected by the tax cut. Ahn had also wanted to maintain the corporate tax cut.

Of the 137 lawmakers who answered the survey, four lawmakers had multiple positions. Of those interviewed, 15 refused to state their views on the matter.

The Grand National Party said it will hold a general lawmakers’ assembly Monday to come up with a final solution.

It remains unclear whether the party will hold a vote to change the official platform or to allow the leadership to make a decision. How to conclude the debate will also be decided at the meeting, said GNP floor leader Kim Moo-sung.

It takes two-thirds of the party’s incumbent lawmakers to change an official party platform.

Chung, who brought up the controversy, said he will continue to argue his position at the meeting.

By Kang Min-seok, Ser Myo-ja [myoja@joongang.co.kr]