Taxing mattersThe government and ruling Democratic Party (DP) plan to ease property tax rates for people with a single home upon sensing a public backlash over expected tax hikes coming from the raising of the state appraisal value of real estate. This band-aid action after delivering a blow is bad enough. But the DP is out to politicize the tax easing to increase its chances of winning a by-election for the Seoul mayoral post next year. The DP proposes the easing target for people with homes valued at 900 million won ($793,000) or less. The Blue House wants to keep the threshold at 600 million won, fearing the benefit going to some of the upper class in southern Seoul.
Whether the threshold is 600 million won or 900 million won, the ultimate purpose behind the measure appears to be the same. The ruling front is out to win over voters in Seoul. The proponents of the 900-million-won threshold wish to draw votes from the upper middle class while those championing 600 million won want to restrict the favor to the traditional working class. The hike in property taxes has already raised suspicions of discriminative taxes on people living in expensive homes to draw votes from the less wealthy or house-less. Public policy is being used entirely for political gain instead of protecting or aiding the people.
The real estate policy under the liberal government has utterly failed because it was entirely led by political design, not market approaches. Forced oppression of demand through regulations on multiple-home owners instead of increasing supplies to ease demand led to runaway housing prices. The Tenants Act aimed to protect tenants only caused a rent shortage crisis. Conflict deepened between landlords and tenants as well as between those living in expensive and less expensive homes. Rage spilled over upon a plan to impose high taxes even on those with a single home. The extreme action may gain support from DP loyalists, but it bodes badly for society as a whole.
Policymakers are unremorseful over their repeated failures. Choi Jae-sung, senior presidential secretary for political affairs, claimed the crisis resulted from real estate stimuli measures employed by the former Park Geun-hye administration. The liberal Moon administration has been running the country for the fourth year, and yet it still blames everything on its predecessors. It is more or less admitting it cannot handle the current real estate situation.
It must stop politics-led policies immediately. The side effects are too costly to society. Even if taxation needs to be rationalized to reflect today’s property values, the action should be incremental and subtle to minimize the pain felt by the people. It must at least ease transaction taxes so that there is some relief for homeowners.