'Controversy is heating up over the government's 2026 tax reform plan announced in early August. Resistance from groups facing increased tax burdens whenever tax laws are revised is somewhat inevitable. However, the core of this debate is not simply whether to raise taxes. The key issues are: how far should taxation on ultra-high-value homes be strengthened? And is it fair to impose significantly different tax burdens on single-home owners depending on whether they actually reside in the property?
'The government describes this as "normalization of taxation." Under the plan, the comprehensive real estate tax basic exemption for one household owning one home will be raised to 1.4 billion won (in assessed value) for primary residences but lowered to 900 million won for non-residential properties, while the supplementary real estate tax on ultra-high-value homes will be strengthened. Capital gains taxes will also be increased based on whether the property is used as a residence or not. Opponents criticize this as "pinched tax increases" targeting specific home owners.
'One of the most important principles in taxation is "equity." Taxes are a system by which the state forcibly collects part of private property according to law. However, what constitutes fair taxation has varied over time and with economic conditions. Since the industrial society era, progressive taxation has developed, respecting property rights while requiring those with greater ability to pay to contribute more. "Broad tax base, low tax rates," along with appropriate progressive tax rates, have long been the basic principles of tax policy.
'Now is the time to re-examine these standards of equity. The information and communications revolution and advances in artificial intelligence are boosting productivity while simultaneously intensifying the concentration of income and assets among a small minority. To support the middle- and lower-income classes who have lost jobs due to technological changes or whose income bases have weakened, the role of public finance must inevitably expand. There is an unavoidable aspect to increasing the tax burden on ultra-high-income earners and holders of ultra-high-value assets. However, equity, predictability, and taxpayers' ability to pay must all be considered together.
'In Korea, the top marginal rate for comprehensive income tax reaches 49.5% when local income tax is included, and the top rate for inheritance and gift taxes stands at 50%, among the highest in the world, making further tax increases difficult. In particular, the inheritance tax brackets established to overcome the 1998 foreign exchange crisis have not been revised for over 30 years, making them increasingly out of step with reality when considering inflation and other factors since then.
'With housing prices rising sharply recently around Seoul's Gangnam District and along the Han River, the need to strengthen holding taxes on ultra-high-value homes has grown. Imposing appropriate holding taxes on owners of high-value homes who have gained substantial asset profits from rising housing prices aligns with the principle of fair taxation. Strengthening holding taxes may also increase market supply and contribute to market stability. Treating holding taxes on ultra-high-value homes as universal tax increases rather than targeted "pinched" measures is consistent with principles of fairness.
'However, there are cases where individuals have substantial assets but low cash income, such as elderly people who have lived in the same home for a long time but face reduced income after retirement. To succeed, strengthening holding taxes on ultra-high-value homes must be done reasonably while also providing an "exit option" to prevent excessive transaction tax burdens when low-income elderly sell their homes or move to lower-priced properties.
'Moreover, differentiated taxation based on whether a single-home owner resides in the property or not largely conflicts with the principle of equity. Modern civilized society is so mobile that it can be called a "nomadic" society, where relocation for work, education, or rural living is free and diverse. If rental income is generated, rental income tax can simply be imposed. Excessively differentiating tax treatment based on residence type itself may infringe upon basic rights and could cause significant adverse effects in the jeonse (deposit-based rental) market.
'There is a saying: "No one can defeat the market." In this era of extreme polarization, we believe that appropriate universal tax increases for high-income and high-asset groups are necessary. At the same time, taxes should not be used as a tool to punish specific groups. This is the path to simultaneously achieving "normalization of taxation" and "fair taxation."
in OPINION
