[Viewpoint] The State Punishes Your Death

South Korea's Inheritance Tax Rate Is Among the World's Highest
Time to Face Both Its Benefits and Side Effects
and Pursue a New System

Discussions on reforming inheritance tax are heating up. We have been given another unmissable opportunity to abolish or bring meaningful changes to this violent system that causes distortions in all kinds of economic phenomena.

The desire to inherit is human nature. Taxes suppress this. A system that goes against human instincts causes inefficiency. Professor Seungwook Kim, Emeritus Professor at Chung-Ang University, wrote in his book The State's Plunder, Inheritance Tax that the explanation that communism failed because it did not consider selfishness is persuasive. Many countries have abolished or reduced inheritance tax rates because they have recognized that respecting the human self-preservation instinct of "intergenerational transfer of wealth" brings efficiency, Professor Kim analyzed.

Inheritance tax is a second tax. It is collected once as income tax during the wealth formation process, and once again at the time of the owner's death. When the state takes inheritance tax, it provides nothing to the owner. This is why inheritance tax is called the state's unearned income or "death tax." Many negative economic behaviors currently occurring stem from inheritance tax. Strange acts such as major shareholders trying to lower stock prices or crimes like preferential treatment of related parties mostly happen because of inheritance tax. If a particular system encourages crime, we should suspect not only punish it but also that the system has serious flaws.

Inheritance tax punishes efforts and success toward wealth accumulation. Novelist Bok Geo-il sharply stated in his article "Let's Abolish Inheritance Tax" that we must realize that although we mistakenly think we live under private property rights, in reality, a significant portion of your and my property already belongs to the state. South Korea's highest inheritance tax rate reaches a world-leading level of 60%.

Inheritance tax functions to block the intergenerational transfer of assets while turning a blind eye to economic distortions. It is not a just tax but an unnatural system that denies human instincts and common sense. We need to move this system somewhere in the middle?maintaining the original purpose of inheritance tax, which is to minimize inequality caused by wealth succession, while preventing various inefficiencies and distortions of negative human behaviors.

As proposed by the Presidential Office, it is necessary to lower the tax rate from the current level and introduce a capital gains tax that enables corporate succession. Capital gains tax is a method of taxing not at the time of inheritance of stocks or real estate but when the next generation sells the assets. Through such preparations, our ultimate goal should be to abolish inheritance tax. The state’s responsibility is to establish mechanisms to help those disadvantaged by inheritance separately from inheritance tax.

This article’s purpose is not to advocate reforming inheritance tax from the perspective of the wealthy or conglomerates. We must engage in discussions to find a balance between the healthy intent of inheritance tax and the inevitable side effects it causes, and I want to point out that a rational conclusion can be drawn from an honest understanding and acknowledgment of inheritance tax.

There are various calculation formulas, but if you inherit 2.6 billion won, the state applies a 40% tax rate. 2.6 billion won is the amount of the most recent first-place lottery prize. The tax that the lucky winner must pay is 32%. South Korea operates a system that protects lottery winnings more than the property that citizens have worked hard to accumulate throughout their lives. Isn’t change necessary?

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