Punitive taxes on homeowners

In a National Assembly meeting on Tuesday, Rep. Kim Ji-nai of the Open Minjoo Party urged people to pay taxes for development gains. “There is nothing wrong with living in a luxury apartment or your property prices going up as long as you pay taxes for unearned income,” she said. Her remark sparked criticism from United Future Party members who said it goes to show that the recent property policies aim at levying taxes, accusing them of turning the property market into a fighting ring with the world’s most punitive taxes.

Kim later explained that her remark was directed at United Future Party members who booed. However, she is being criticized for failing to empathize with those she represents. Whenever the Moon Jae-in administration has introduced new property policies, it has argued they would increase taxes only on multiple home ownership and have a very limited impact on those who only have one house. In reality, however, every homeowner is paying much higher taxes than before.

In an attempt to curb speculation, the Moon administration has increased posted prices based on which the property tax is calculated. 580,000 households in Seoul are now paying 30% more property tax. To make things worse, the comprehensive real estate holding tax will increase by 0.1~0.3 percentage point next year for those who have only one house if the posted price of the house is higher than 900 million won. This will only increase the burden of the homeowner who will earn no extra income unless they sell their houses. This is horrifying news for retirees who only have one house and no income.

The ruling Democratic Party of Korea signed multiple new property tax bills that would make it possible to double the comprehensive real estate holding tax for multiple homeowners and increase the capital gain tax up to 72 percent. Even though the policies are designed to curb speculation, such a sudden tax hike risks undermining people’s property right. As demonstrated by previous property policies, imposing extremely high taxes have had little success in stabilizing the real estate market. Accusing people who have saved up to buy one house of speculation goes against “the principle of over-prohibition” under the Constitution and runs counter to the government’s goal of protecting those who actually need a house.