[Lee Jung-jae Column] If This Government Fails to Abolish the Comprehensive Real Estate Tax, It Will Never Be Abolished

[Asia Economy Lee Jeong-jae, Director of the Economic Media School and Editorial Advisor] There is a tax that is completely inconsistent with the freedom and fairness that the Yoon Seok-yeol administration talks about. It is the Comprehensive Real Estate Holding Tax (종합부동산세, Jonghap Budongsanse). It would be refreshing to abolish it immediately, but for some reason, the government and ruling party have no intention of doing so. At best, they argue with the opposition party over raising the tax threshold to 1.2 billion KRW or easing the heavy taxation on multi-homeowners. That is all. Hence, when looking at next year’s budget, people get confused whether it is Lee Jae-myung’s budget or Yoon Seok-yeol’s budget, or say that the Democratic Party is the 'ruling opposition party.' This has been a constant discomfort while watching this budget debate.

The Comprehensive Real Estate Holding Tax is an ideological tax built over more than a decade by the opposition and left-wing camps. Debating its easing means playing within the real estate political frame and ideological palm created by the opposition. Even the negotiation itself was sloppy. To reach a compromise at the midpoint, pressure should have been applied with the strongest stance, but instead, they barely offered a minimal easing as if begging. It was just enough for the opposition to pretend to graciously back down.

The Presidential Office and ruling party seem to have already forgotten how bad this tax is. To briefly recall, first, the Comprehensive Real Estate Holding Tax is a divisive tax. Initially, it divided Gangnam and non-Gangnam areas, then the haves and have-nots. Second, it lost its original intent. Under the Roh Moo-hyun administration, the tax was a wealth tax targeting the top 0.5% wealthy class. The Moon Jae-in administration went further, saying it would tax only the ultra-rich. It seemed to reflect a will not to repeat Roh’s failure. But things rarely go as planned. It turned into a drinking party that did not end with just one glass.

This year, 1.31 million people are subject to the tax, and in Seoul, it applies to 8% of homeowners. Third, it lost the principles of taxation: predictability and fairness. The tax differs from neighbor to neighbor, depending on where one lives, and even whose name the property is under between spouses. The tax system has become a patchwork, and since no one knows how much house prices will rise or fall next year, it is impossible to predict how much tax one will owe. The sigh of an elderly couple who must save every penny without spending their pension to avoid becoming tax evaders is not someone else’s story.

At this point, it is time to return to the starting point. There is no Comprehensive Real Estate Holding Tax in conservative governments’ real estate policies. The Lee Myung-bak administration made every effort to abolish it. At that time, Finance Minister Kang Man-soo took the lead. The Constitutional Court even ruled it unconstitutional. However, complete abolition failed because the opposition persistently resisted and kept it alive. The left-wing camp insisted, "It must survive even if on life support; if it survives, there will be opportunities." Kim Soo-hyun, former Blue House Policy Chief and designer of the tax under both Roh and Moon administrations, said in a 2008 media interview, "There is no need to remove the life support for the Comprehensive Real Estate Holding Tax. Protecting it can be the last safety net." And ten years later, as he said, the opportunity came. The tax, which had been barely breathing underground, was brought out and turned the world upside down again.

The returning Comprehensive Real Estate Holding Tax has caused far greater harm and side effects than during the Roh administration. Yet, strangely, it is hard to find anyone in the current government or ruling party calling for its abolition. Rather, they accept it and suggest adjusting and using it. They have become accustomed to the tax. The majority of the public reacts similarly. They only complain, "Why is the tax so high? Please reduce it," but calls for abolition are rarely heard. This alone means the Moon Jae-in administration’s real estate political camp has achieved great success.

That said, the Comprehensive Real Estate Holding Tax is not a treasure trove for the opposition either. The opposition and left-wing camps should also reconsider. The tax was designed as a wealth tax. Ignoring its design intent, it ran wild as a divisive and punitive tax, losing two administrations. As Kim Soo-hyun said, even looking through the lens that "real estate is politics," the camp that should lead the abolition of the tax is actually the opposition.

The Yoon Seok-yeol administration has talked about unity. The beginning of unity is to prevent the institutionalization, habitualization, universalization, and normalization of division. The Comprehensive Real Estate Holding Tax has already become a symbol of the institutionalization, habitualization, universalization, and normalization of division. If this government fails to abolish it, the tax will survive for a long time and repeatedly plunge the country into division and conflict. Abolishing the Comprehensive Real Estate Holding Tax is the start of unity. If the opposition and left-wing camps’ resistance is a problem, there is no need to worry. No matter how foolish, would they forget that they lost power twice because of this tax?

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