[Lee·Yoon Pledge Comparative Analysis] Lee Jae-myung "Establish New Land Holding Tax" vs Yoon Seok-yeol "Complete Reform of Comprehensive Real Estate Tax"

Ruling and Opposition Presidential Candidates' Real Estate Tax Policy Pledges

Lee Jae-myung, the Democratic Party presidential candidate Photo by Yonhap News

Lee Jae-myung: "Tax All Land... Distribute All Tax Revenue as 'Basic Income' to the People"

[Sejong=Asia Economy Reporter Son Seon-hee] Lee Jae-myung, the Democratic Party presidential candidate, has pledged to introduce a new 'National Land Holding Tax' starting from the concept of land public ownership. Although the current comprehensive real estate tax (Comprehensive Real Estate Holding Tax, 종부세) system already imposes holding taxes on land, he intends to create a new tax category to strengthen the tax burden. Oh Moon-sung, professor of Tax Accounting at Hanyang Women's University and president of the Korean Tax Policy Association, said, "It seems the market has clearly received the signal that this will be a heavier tax than the current comprehensive real estate tax."

Unlike the comprehensive real estate tax, which targets high-priced real estate owned by about the top 2%, the National Land Holding Tax basically considers all land as taxable. People who own houses will also pay taxes on the land attached to those houses. Professor Oh pointed out, "There is an overlap in tax bases not only with the comprehensive real estate tax but also with the land portion of property tax, and there is no concrete plan on how to operate the National Land Holding Tax," adding, "Just as the comprehensive real estate tax inherently started with the problem of 'double taxation,' the National Land Holding Tax has the same issue."

Candidate Lee perceives land ownership as 'speculation' and argues that taxation should be imposed to block it. This is why he describes the National Land Holding Tax as a 'corrective tax aimed at curbing real estate speculation.' There is a critical perception that owning land and profiting from it constitutes 'unearned income.' During his tenure as governor of Gyeonggi Province, he also proposed establishing such a tax category as a local tax.

However, being aware of potential tax resistance, he announced that all revenue from the National Land Holding Tax would be paid as basic income in the form of local currency. In other words, the plan is to collect taxes from landowners and distribute them as dividends to all citizens.

Nonetheless, since the National Land Holding Tax is still at an early idea stage, there are calls for concrete work to resolve issues such as double taxation before practical implementation. Complaints about double taxation have already been raised under the existing comprehensive real estate tax system, and imposing holding taxes on all national land could lead to intensified tax resistance, including constitutional lawsuits. Tax fairness is also a concern. Although the principle of 'paying taxes according to the proportion of land price' seems fair, it may not be so in reality. For example, owners of expensive high-rise apartments might own less land arithmetically and thus pay less tax. Professor Park Ki-baek of the University of Seoul predicted, "It seems practically difficult to apply because it is hard to accurately separate building prices from land prices."

Yoon Seok-yeol, the People Power Party's presidential candidate [Photo by Yonhap News]

Yoon Seok-youl: "Easing Holding Tax... Integrate Comprehensive Real Estate Tax into Property Tax"

Regarding views on real estate, the biggest difference between Yoon Seok-youl, the People Power Party presidential candidate, and Lee Jae-myung of the Democratic Party is that Yoon acknowledges the 'property rights' of real estate. Accordingly, his pledge focuses on easing holding taxes on real estate.

On the 14th, Yoon stated on social media, "We will alleviate the rapid increase in holding tax burden on the people and slow down the rise in official property prices to prevent a sharp increase in holding taxes," adding, "In the mid to long term, we will consider integrating the comprehensive real estate tax into property tax or exempting single-homeowners altogether." Yoon directly criticized the comprehensive real estate tax as a 'problematic tax,' citing issues such as double taxation with property tax, violation of tax equality principles, and infringement of property rights.

However, Yoon's real estate tax policy also faces criticism. While property tax is levied on 'property' such as land or houses, the comprehensive real estate tax is imposed on 'people' who own real estate, taxing them individually. Since the two tax systems are completely different, integrating them as Yoon mentioned is practically difficult. Professor Park said, "Property tax is managed by basic local governments only for their respective areas," adding, "The current comprehensive real estate tax was created to impose taxes separately on people owning real estate in multiple regions, so reverting it back is not easy." Regarding the policy to ease both holding and transaction taxes simultaneously, he pointed out, "While I partly agree with reducing excessive comprehensive real estate tax, there needs to be an explanation on where the reduced tax revenue will be compensated."

Since Yoon mentioned the double taxation issue, some interpret that reforming the comprehensive real estate tax ultimately means its effective abolition. However, this would not be free from criticism of 'tax cuts for the rich.' Considering that the comprehensive real estate tax was introduced to alleviate excessive asset inequality caused by real estate, Yoon's pledge would mostly benefit the wealthy high-asset class.

Of course, there is a counterargument that the 'tax cuts for the rich' frame is an exaggerated view. Professor Oh said, "Looking at income tax alone, 20% of the population bears 80% of the total tax burden, so it is somewhat natural that the absolute tax amount paid by the rich decreases as holding taxes are reasonably adjusted," adding, "Since the tax cuts are not exclusively targeted at the rich, I find it hard to agree with the criticism of 'tax cuts for the rich.'"