'Realization of Official Property Prices' Leads to Successive Sausage Tax Increases... Concerns Over Loss of Welfare Benefits

Concerns Over Exclusion from Basic Pension Recipients... "Effectively a Tax Increase" Criticism Also Raised

[Asia Economy Reporter Jang Sehee] The rise in official real estate prices affects the overall welfare system, including basic pensions, support for elementary to high school education expenses, health insurance premiums, and the Earned Income Tax Credit (EITC). This is because the payment calculation criteria include not only income but also assets such as housing. There are concerns that the tax burden on the middle class and above will increase, while low-income groups may be excluded from welfare benefit eligibility.

◆ Exclusion from Basic Pension Eligibility = According to a simulation service provided by the welfare portal ‘Bokjiro’ on the 16th, a single-person household living in a metropolitan area with no income at all cannot qualify for basic pension support if their earned income is 1.69 million KRW and their only asset, a house, has an official price exceeding 500 million KRW. According to the official prices announced by the Ministry of Land, Infrastructure and Transport the day before, an apartment complex in Sejong surged from 410 million KRW in January last year to 720 million KRW this year. If the apartment owner’s income remains the same, they will no longer be eligible to receive the basic pension.

This is because the sum of the monthly income assessment and the monthly income conversion of assets reached 1.71 million KRW.

Support for elementary to high school education expenses is also denied if a family of three living in a metropolitan area has earned income of 4 million KRW and their only asset, a house, has an official price exceeding 300 million KRW. The household’s recognized income was assessed at 7.21 million KRW.

Health insurance premiums for regional subscribers who must pay the full amount are also increasing. Regional subscribers face higher health insurance premiums solely due to the rise in official prices, regardless of income. Looking at the current official prices, Seoul saw a 19.91% increase, which means those owning high-priced apartments will face even greater health insurance premium burdens.

With official prices rising nationwide?7.40% in Jeonbuk, 4.76% in Gwangju, and 4.49% in Jeonnam?there is also a possibility that welfare program recipients targeting low-income groups, such as EITC, will decrease. To qualify for EITC, as of June 1 of the previous year, the total assets owned by all household members must be less than 200 million KRW. The total assets include housing (official price by the Ministry of Land, Infrastructure and Transport), land (official land price), passenger cars, jeonse deposits, and financial assets.

◆ Experts: "Effectively a Tax Increase... Need for Gradual Realization" = Experts express concern that the rise in official prices increases quasi-tax burdens.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "It is collecting a significant portion of taxes without legal authorization," adding, "Although the tax rate is explicitly the same, it is similar to an actual adjustment of the tax rate." He emphasized, "There is a need to adjust the tax rate or gradually realize the official prices."

As tax burdens increase while welfare benefits decrease, the government is also struggling to devise countermeasures. A representative example is the decision to expand asset deductions to ease the insurance premium burden for regional health insurance subscribers. The Ministry of Economy and Finance plans to examine whether welfare benefits are excessively reduced due to the rise in official real estate prices. A government official stated, "Since the original welfare program eligibility criteria are not high, we do not expect significant changes," but added, "We plan to review whether many people are losing existing welfare benefits due to the rise in official prices."

This content was produced with the assistance of AI translation services.