GNP mulls ‘Buffett Tax’ to attract poor voters

The Grand National Party is mulling introducing a so-called “Buffett Tax” on the wealthy, according to party officials yesterday. But critics see this as a populist gesture intended to appeal to young voters ahead of next year’s general and presidential elections.

The name refers to U.S. billionaire investor Warren Buffett, who proposed earlier this year the notion of raising taxes for the wealthy, including himself, and noted that the ultra-rich pay a lower percentage of their income in taxes than most people.

“Wealthy Koreans have generally paid proportionally lower taxes relative to their incomes, apparently due to loopholes in taxation policies,” a ruling party official was quoted as saying by Yonhap News Agency.

“Our party is discussing measures to collect more taxes from the rich.”

The official said the ruling party is “discussing creating a new segment at the top of the income tax structure,” and that “people in the top income bracket may be subject to the highest tax rate for their overall incomes, including stock and interest earnings.”

The move comes as young voters expressed their dissatisfaction with the party during last month’s Seoul mayoral by-election. Many were discouraged by negative trends such as high unemployment, falling property prices and the widening income gap.

The unified liberal candidate Park Won-soon, now Seoul’s mayor, beat ruling party candidate and second-term lawmaker Na Kyung-won in the mayoral on Oct. 26. Exit polls showed that almost 70 percent of voters in their 20s and 40s supported Park, an independent backed by the opposition camp.

Since then, the GNP and government have been trying to win the hearts of young voters ahead of next year’s elections.

But as the party considers pushing ahead with the Buffett Tax, officials remain concerned about the crisis of confidence among the public regarding the party’s ability to manage policy.

Even in September, the government decided to scrap its tax reduction plan for large companies and high-income earners because of pressure from both ruling and opposition party lawmakers. They argued that high-income earners should cough up the bulk of taxes to bolster the country’s fiscal soundness.

The Lee Myung-bak administration had been pushing to lower taxes on the wealthiest members of society, as well as on the chaebol, for three years. This was done under the belief that, with more capital to invest, the large conglomerates could ramp up their profits and end up doing a greater service to the nation’s tax revenues despite the trimmed rate.

The government’s announcement that it would scrap the plan - one of Lee’s campaign pledges - invited criticism from large companies as well as high-income earners as they faced a sudden policy change.

However, not all party officials are in favor of the Buffett Tax. Some party critics warn that the GNP’s struggle to shake off its “pro-rich, pro-conglomerate” image could trigger resistance from those in high-income brackets and large companies.

In a related move, the ruling party is also reportedly pushing to drastically increase next year’s budget by about 1 trillion won ($897 million) for child care and welfare for the elderly. Critics have also denounced this as a populist move that could clash with efforts to improve fiscal soundness. The government has set next year’s budget at 326.1 trillion won, up 5.5 percent from this year.

Additionally, with general elections approaching next year, the GNP is plunging deeper into turmoil over how to overhaul its power structure and relations with the president in a way that meets the demands of voters.

GNP Chairman Hong Joon-pyo said Saturday he will consider closing the party’s headquarters in Yeouido and moving all party staff and functions into the National Assembly as part of efforts to do away with what he called “high-cost, low-efficiency” politics. The GNP currently pays 120 million won every month to rent seven floors of a building in the financial district.

Adding further pressure, a group of five reform-minded GNP lawmakers issued a statement yesterday urging Lee to offer a public apology over the ongoing crisis faced by the ruling party. They called for a change in policy to focus more on employment and welfare. Some 20 GNP lawmakers have reportedly signed the statement.

By Lee Eun-joo, Yonhap [angie@joongang.co.kr]