Abolishing the spouse inheritance tax is necessary

Inheritance tax reform is expected to gain speed as Democratic Party of Korea leader Lee Jae-myung has expressed support for the abolition of the spouse's inheritance tax that the People Power Party proposed. If the Democratic Party of Korea agrees with the ruling party’s proposal to exempt spouses from inheritance tax, Korea will follow the examples of the United States, Japan, and France, where spouses do not pay taxes on inherited assets.

“The exemption of the spouse's inheritance tax (proposed by the ruling party) is reasonable,” Lee stated on Friday. “We agree with it, and I hope it will be processed this time.” The Democratic Party of Korea had worked on inheritance tax reform, increasing the bulk deduction from 500 million won to 800 million won and the spouse deduction from at least 500 million won to at least 1 billion won. The goal is to allow the surviving spouse to continue living in their home without being forced to sell it due to tax burdens. In response, the ruling party was willing to discuss the proposal, despite earlier opposition to abolishing the spouse's inheritance tax.

The issue of spouse inheritance tax has long been a challenge for Korea. The original purpose of inheritance tax is to tax wealth transfers between generations, such as from parents to children. However, when a surviving spouse inherits their deceased partner’s assets, it is not a generational transfer but a redistribution within the same generation. Moreover, when the surviving spouse later passes the inherited assets to their children, the same property is taxed again, leading to double taxation—contradicting the principle of "one-generation taxation."

Additionally, taxing spouse inheritance contradicts the logic behind property division in divorce cases, where asset contributions are recognized, and gift taxes are waived. For similar reasons, many developed nations, including the U.S. and France, do not impose inheritance tax on assets transferred between spouses.

As bipartisan support grows, abolishing the spouse inheritance tax seems reasonable. However, careful discussions are needed on issues such as handling large-scale wealth transfers, particularly for major corporate shareholders, and compensating for the potential loss in tax revenue. Enacted in 1950, the spouse inheritance tax has remained unchanged for 75 years. Given evolving economic realities, it is time to align Korea’s policy with global standards.