Song Young-gil vs Reform Faction, the '2%' Battle over Comprehensive Real Estate Tax

The leadership says, "Not a tax cut for the wealthy, but partial relief for single homeowners"
Reformists warn, "We must not send the wrong signals to the market"

[Image source=Yonhap News]

[Asia Economy Reporter Park Cheol-eung] The Democratic Party of Korea will hold a party caucus on the afternoon of the 18th to decide whether to change the comprehensive real estate tax (종합부동산세) imposition criteria from 900 million won to the 'top 2%'. Party leader Song Young-gil strongly advocates this proposal, but there is fierce opposition mainly from reformist lawmakers within the party, making it quite possible that the decision will be made by a vote. Of course, a compromise may emerge during the discussion process.

Kim Seong-hwan, the Democratic Party's senior deputy floor leader, said in a phone interview with Asia Economy on the day, "The agenda for the party caucus remains the same as before," adding, "We need to wrap things up in some way today."

The Democratic Party discussed the party's real estate special committee (Special Committee) proposal to tax only the top 2% of official land prices at the party caucus on the 27th of last month but failed to reach a conclusion. The Special Committee later reviewed a revised proposal but judged it to be unrealistic, so the same issue is scheduled to be discussed again on this day. Previously, about 60 lawmakers belonging to progressive reform groups such as 'The Better Future', the Democratic Peace Alliance (Minpyeongryeon) which traces the legacy of the late lawmaker Kim Geun-tae, and the pro-Moon Jae-in lawmakers' group 'Democracy 4.0' submitted a letter of opposition to the leadership.

The leadership's position is that this is not a 'tax cut for the rich' but rather an effort to ease the burden on single-homeowners under the policy direction of 'tax increase for the rich.' Deputy Floor Leader Kim said, "Last year, measures were taken to raise the comprehensive real estate tax rates for multi-homeowners, which will be implemented at the end of this year," adding, "Single-homeowners will be more strongly protected, and multi-homeowners are encouraged to put their houses on the market to ensure housing stability for those without homes. Even if the comprehensive real estate tax for single-homeowners is slightly lowered, the overall scale of tax increase is significant."

However, the opposition side believes this will send the wrong signal to the market, so a heated debate is expected at the caucus. Representative Wi Seong-gon, who leads 'The Better Future', said in a phone interview, "There is a consensus formed, so either I or another lawmaker will express opinions during the caucus," adding, "We need to send a signal to stabilize housing prices in the real estate market, and (easing the comprehensive real estate tax) does not help." It is also known that Kim Jin-pyo, chairman of the Special Committee, and Jin Sung-jun, a pro-Moon reformist lawmaker, are preparing presentations for and against the proposal, respectively.

If the proposal goes to a vote and is rejected, it would be fatal to the leadership's authority, and even if it passes, the disclosure of the approval ratio could lead to greater discord. The caucus is expected to consider these risks during the discussion. Lee Sang-min, a five-term senior Democratic Party lawmaker, said, "I think we should respect the leadership's judgment," adding, "We should not cause greater confusion and must consider external credibility."

Another Democratic Party lawmaker said, "The discussion at the caucus will be heated, but we will try to avoid going to a vote as much as possible," adding, "Various alternatives will likely be proposed."