The ruling Democratic Party of Korea seeks to legislate a temporary delay of the imposition of heavy transfer taxes on owners of multiple homes for profits from their housing sales. The tax rate rises up to 82.5 percent on capital gains.
The party is moving to buttress presidential candidate Lee Jae-myung’s policy through legislation after Lee on Sunday proposed postponing the tax for a year.
Rep. Park Wan-joo, chief policymaker of the party, said Tuesday that he would start an internal debate on the proposal and that he would not exclude processing it in an extraordinary session of the National Assembly this month.
The proposal is like a trick to entice people ahead of the presidential election by putting a tax bomb on hold for the time being.
Recently, Lee proposed postponing the heavy transfer tax for owners of multiple homes, but in July, he had urged even stronger measures to cut off “all sources of unearned income,” apparently referring to real estate transfer income. He is changing his stance to raise support as the presidential election approaches.
Rep. Yoon Hu-duk, Lee’s chief policymaker on the party’s election campaign committee, is said to be carrying the ball on the legislation of the delay. Last year, however, Yoon as chairperson of the Strategy and Finance Committee of the assembly, led the process to impose the heavy transfer tax on owners of multiple homes. This time, he is carrying the ball in the opposite direction.
Real property transfer tax is an important issue related to people’s livelihoods, but Lee and the party seem to treat the tax system off-hand.
So, the party, the government and the presidential office walk out of step, causing confusion. Floor Leader Yun Ho-jung expressed dissatisfaction with the proposal, citing opinions that the same step taken in the past turned out to be ineffective.
Cheong Wa Dae drew a line, saying it is a matter for the next government to review. The Ministry of Economy and Finance says it has not discussed such an idea and that it has no plan to carry it out, either.
People who do not own their own homes live in homes leased by landlords with multiple homes. Nevertheless, the party has depicted owners of multiple homes as speculators who have caused housing prices to soar, and dropped tax bombs even on homeowners without second homes. Now it is dancing to another tune, because, needless to say again, it worries that public fury over real estate problems will adversely affect their chances in the presidential election.
The real estate taxation system of the Moon Jae-in administration is far from rational. The administration should have lowered transaction taxes because it raised holding taxes sharply. But it drastically jacked up transaction taxes such as acquisition and transfer taxes. It is necessary to lighten the transfer tax burden to revive housing sales and stabilize property prices. But it is not right to ease it temporarily with an election in mind.
If Lee and the party realized that a heavy transfer tax causes problems in the market, they must repeal it. The housing market has been severely distorted by a string of anti-market policies. A quick fix to solace angry voters is far short of getting the market back to normal.
They need to revamp the real estate taxation system overall, and at the same time come up with measures to increase supply by market principles.
A temporary policy flip ahead of the presidential election is merely sweet talk to curry favor with voters. It could never solve problems in the market.
If the party and its presidential candidate intend to modify their policies, they must first set the oiverall course, establish principles, come up with concrete plans under the principles and act on the plans. But considering that Lee still adheres to his pledges that go against the market, such as a land possession tax and basic home -- a concept similar to basic income -- it is questionable if they will go further in a new direction.
By Korea Herald (email@example.com