The welfare-tax equation

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The welfare-tax equation

Political leaders have joined the roaring debate on how to fund welfare. As President Park Geun-hye on Monday reiterated her campaign pledge of “welfare without tax hikes,” Moon Jae-in, newly elected chairman of the opposition New Politics Alliance for Democracy, stressed the need to fund welfare through more taxes on the corporate sector and high-income earners. With the two leaders poles apart on the issue, we can hardly expect the debate to move forward toward a grand bargain.

Park’s persistence sounds inappropriate, as it could hamper current progress toward a national agreement. While the opposition wants to tackle the issue through a broadly inclusive national special committee for tax reform, the ruling Saenuri Party wants to address it through a separate body. It is right for concerned parties to discuss welfare priorities, readjustment and funding on a parliamentary level. But the president nevertheless prioritized taxpayers over a National Assembly debate, which translates into a rejection of a tax increase even if it’s agreed on by both sides.

We wonder why the president adheres to economic recovery to the extent that she had to resort to comparing tax hikes to deceiving the people. The public has reached consensus on the fictiveness of “welfare without tax increases.” The government’s welfare spending per gross domestic product is expected to nearly double from the current 10.4 percent to 18.6 percent over the next two decades and reach a whopping 25.6 percent by 2050 while the government undergoes a chronic lack of tax revenue. If the president waits for economic recovery to meet the growing welfare demand, it could mean a drastic decline in benefits unless the economy revives.

Moon’s argument is dangerous, too. He drew the line by highlighting the need for higher taxes on the rich and no tax increase for the poor, while stressing the importance of more welfare services. But beyond political rhetoric, that’s irresponsible. Moon said he will compete with the ruling party starting with the economy. But his populist approach will likely backfire, as seen in his defeat in the 2012 presidential race.

Moon is not in a position to attack the government’s welfare policy. He came forward with a welfare commitment costing 197 trillion won ($1.79 billion) over the next five years - compared to Park’s 135 trillion won - during the last campaign. The debate is like an equation involving tax increases and welfare restructuring at the same time. The president and opposition leader must first give up on their obstinance.

JoongAng Ilbo, Feb. 10, page 34

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