A half-baked agreement once again

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A half-baked agreement once again

On September 1, the People Power Party (PPP) and Democratic Party (DP) agreed to a revision to the Real Estate Tax Act to help ease growing tax burden from the ill-conceived comprehensive property ownership tax. Thanks to the agreement, up to 400,000 people, including those who became owners of two homes temporarily, could avoid excessive taxation on their real estate. But the agreement is half-baked as the DP refused to accept the PPP’s demand to lift the ceiling for the property ownership tax to 1.4 billion won ($1.03 million) from the current 1.1 billion won and lower the rate of reflecting home prices for taxation to 60 percent of their market value from the current 100 percent.

The number of people subject to the toughened comprehensive property tax exceeded 1 million in 2021 for the first time since the tax for the rich was introduced in 2005. The total amount of the tax soared to 7.3 trillion won, an 87 percent increase from the previous year. As a result, a number of retirees and elderly who owned a single home for their entire lives were bombarded with an inexorable tax increase.

Despite the public’s vehement opposition to the tax bomb, the PPP and DP could not even set up a subcommittee to discuss effective ways to alleviate their deepening woes due to a brawl over who should take the chairmanship of the committee. The two parties hurriedly reached the unsubstantial agreement after passing the deadline on August 31. We wonder if they still can call themselves the champions of people’s livelihoods.

Both parties are responsible for the mess. After adhering to its position to take the helm of the subcommittee until the last minute, the PPP eventually gave the nod to the revision without substance. The DP also reversed its position after the election of Rep. Lee Jae-myung as party head. During the campaign for the March 9 presidential election, the DP’s candidate attacked the Moon Jae-in administration for giving “excessive tax burdens” to people who happened to own two homes by chance. The DP has returned to its signature framing of the easing of the comprehensive tax as a reduction in the tax for the rich.

In the face of strong public opinion against the senseless revision, the two parties agreed to fix the loopholes. However, even if they manage to raise the comprehensive tax ceiling to 1.4 billion won, more than 93,000 owners who already paid a higher tax should be refunded. That will cause a lot of inconvenience to them.

In an acceptance speech after his election victory on Sunday, new DP Chairman Lee Jae-myung pledged to support the government if necessary. As a presidential candidate of the progressive party, he vowed to ease the stringent property tax. If the DP under Lee’s leadership could not reach a reasonable agreement, it could be a pipe dream to expect any genuine cooperation from the party.
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