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[Opinion] Comprehensive Real Estate Taxes: A Misguided Policy

[Opinion] Comprehensive Real Estate Taxes: A Misguided Policy

Posted November. 28, 2007 03:08,   


The government’s predictions turned out to be wrong. It argued that comprehensive real estate taxes would force multiple homeowners to sell their houses, pulling down housing prices. Some real estate agencies say that they expected a large number of houses to be put on sale before the new taxes were imposed, but there were few sellers in the end. The housing prices in areas where they soared seemed to be stable now in comparison to earlier last year, but this is largely due to the lack of transactions rather than many houses being on the market.

Adding transfer income taxes to comprehensive real estate taxes has stopped people from selling their houses. No wonder people are not putting their houses on the market. In addition, housing prices have not fallen either because people have given up on selling houses due to taxes. Some people who hope that the next administration will reduce taxes are postponing their transactions.

The average amount of taxes on homeowners who are subject to comprehensive real estate taxes has increased by a whopping 40 percent. The biggest victims are single homeowners and tenants who are far from real estate speculators. Multiple homeowners who have to pay taxes pass the buck to tenants. Taxes sometimes hit innocent victims, contrary to the purposes of the policies or laws designed to protect them. In 1990, the U.S. Congress passed a law imposing taxes on yachts in an attempt to collect more taxes from the rich. Employees of yacht manufacturers, however, lost jobs as millionaires spent money on other items instead.

Policies with good motivation do not necessarily bring good results. They are likely to succeed only when policymakers understand market principles and the nature of money, and take resistance against policies into consideration. However good a motivation might be, a policy that ignores peoples’ selfishness can hardly follow through. Moreover, the purpose of comprehensive real estate taxes was wrong from the start. The administration implicitly exploited the “jealousy” of the majority of people. The imprudent policy by the amateur leftist government gave greater pain to middle-class single homeowners and tenants.

Heo Mun-myeong, Editorial Writer, angelhuh@donga.com