More pain for the middle classMiddle-class households around Seoul have been bombarded by property taxes. Due to rapid reforms of property taxation, tax dues have shot up. Salary earners also face sharp hikes in taxes for employment, insurance, pension and occupational accident coverage. As the increases will be deducted from their monthly paychecks, the amount will amount to almost 9 percent of their pay from next year.
Taxpayers are more sensitive to property taxes as it is levied on unrealized income. The government has been collecting the dues in July and September to help lessen their tax burden. However, homeowners across Seoul should pay more property tax than before.
According to taxation on homeowners over the last three years, 280,847 households with homes worth more than 600 million won ($502,092) saw their property tax surge by more than 30 percent this year, up nearly six times from 50,370 households in 2017. Even though annual property tax increase is capped at 30 percent, that offers little relief due to rationalization in appraisal value of homes.
Many households in northern Seoul are stupefied by the tax hikes as the change in state evaluation value for homes affected them as well as owners of more expensive homes in southern Seoul. If the appraisal value for homes in Gangnam goes up, so does the overall value across the capital and elsewhere. In Seongdong District, eastern Seoul, for instance, as many as 16,420 households saw a jump in property tax this year, compared with just 149 in 2017. Property tax on average rose by 5 percent in non-Gangnam districts, but this year they have gone up to the maximum in many locations.
The surge in taxes makes people’s livelihoods hard. Moreover, the hike is unlikely to stop this year. Households will have less to spend. Home prices also have shot up in Seoul due to short supply under multiple regulations.
The middle class cannot even sell their homes because of heavy taxes on transactions. Meanwhile, home prices in some areas are skyrocketing due to the cap on sale prices on new apartment offerings. The ratio of the middle class tumbled below 60 percent under the Moon administration.
Higher taxes at a time of income stagnation would make lives harder. The government’s real estate policy has failed as all the series of actions to rein in home prices only ended up aggravating pains for the people without bringing home prices down.
JoongAng Ilbo, Sept. 24, Page 34