The time has come for a tax hikeA series of bills apparently aimed at winning votes in the April 7 mayoral by-elections in Seoul and Busan — dubbed as a vote for confidence ahead of the March 9, 2022 presidential election — have been rushed through by the dominant ruling Democratic Party (DP). The centerpiece was a special act to build a new airport on Gadeok Island off Busan with the biggest-ever budget of 28 trillion won ($26 billion) estimated by the Ministry of Land, Infrastructure and Transport. A special bill to compensate surviving victims and families of the deadly clashes between communist sympathizers and military regime decades ago with a 1.3-trillion-won budget and a special act to spend over 5 trillion won to construct “Asian cultural center” in Gwangju were also railroaded.
Other spending bills in the waiting are a special act to commemorate a right-left clash in Yeosu-Suncheon in South Jeolla in 1948 and a 50-billion-won project to build a science academy by state-run utility company Korea Electric Power Corp. in Naju, South Jeolla, home to the liberals. The DP-led Covid-19 relief measures — a compensation law, a profit-sharing plan and a social fund act — also require multi-billion-dollar spending.
After drawing up three supplementary budgets to fight Covid-19 last year, the government has earmarked another 20-trillion-won relief package through debt financing. Such massive spending would not have been rushed if not for the upcoming mayoral by-elections.
No one would refuse a free check, as evidenced from the parliamentary elections in April last year, which delivered a landslide victory for the DP. But due to the government profligacy that has been turning bolder whereas tax income declined for the second consecutive year, the public finance account has been sounding alarms. The DP is now floating the idea of raising taxes. Five-term lawmaker Lee Sang-min of the DP plans to submit a so-called “social alliance tax” to collect 3 to 5 trillion won more from rich individuals and companies. Yoon Hoo-deok of the same party, who chairs the Strategy and Finance Committee in the National Assembly, even proposed a public debate on tax hikes.
Although the DP has finally gotten around the financing means, raising taxes is not easy. What should come first is smart spending. Since spending is inevitable to fight the pandemic, unnecessary expenditures must be reduced. Yet the DP has trotted out multiple spending measures to pull liberal votes to its side and speaks of tax hikes.
Nearly 60 percent of taxes from labor income comes from the higher income group. Yet demanding the higher-income earners to pay more goes against the fair tax principle. The DP must stop its vote-buying spree and try to convince the public of the need for the hike if it is really necessary.