Lee Jae-myung "People Power Party Agrees to Spouse Inheritance Tax Abolition... Let's Process It Quickly" (Comprehensive)

"Validity in Ruling Party's Claim as It Is a Horizontal Transfer"
Opposition Faces Burden of Handling Tax Reform Alone
Raising Blanket Deduction Requires Bipartisan Discussion

Lee Jae-myung, leader of the Democratic Party of Korea, agreed to the People Power Party's proposal to abolish inheritance tax on spouses.

At the Supreme Council meeting held at the National Assembly on the 7th, Lee said, "Exempting spouses from inheritance tax is a horizontal transfer, so it has its own validity," and added, "I agree with this part, so it would be good to handle (the Inheritance Tax Act) this time." He proposed to the ruling party, "Let us promptly process the agreed and consented parts to prevent the unfortunate reality where people who own one house have to sell it and leave their residence due to inheritance tax."

Earlier, on the previous day, Kwon Young-se, emergency committee chairman of the People Power Party, said, "Inheritance between spouses who built their assets together is not a 'transfer of wealth between generations,'" and declared, "We will completely abolish inheritance tax on spouses." Kwon Seong-dong, floor leader of the People Power Party, also stated, "When a couple divorces, property division occurs and no tax is paid on that division, but when one spouse passes away and inheritance occurs, inheritance tax must be paid even between spouses," adding, "Our party has decided as a party policy to push for the abolition of inheritance tax between spouses."

Lee Jae-myung, leader of the Democratic Party of Korea, is speaking at the Supreme Council meeting held at the National Assembly on the 7th. 2025.3.7 Photo by Kim Hyun-min

With Lee partially accepting the ruling party's proposal, the inheritance tax discussion is likely to accelerate. The Democratic Party is currently pursuing a plan to increase the current standard of 'a blanket deduction of 500 million KRW and a spousal deduction of 500 million KRW' to 800 million KRW and 1 billion KRW respectively, allowing a total tax exemption up to 1.8 billion KRW. If inheritance tax on spouses is abolished, there will be room for additional negotiations to ease the tax burden.

Lee's acceptance of the People Power Party's proposal on this day is seen as a step back due to the burden of handling the issue as a fast-track bill if negotiations with the ruling party fail. If the tax reform is pushed through solely by the opposition party, it could provoke backlash from swing voters and others. Additionally, it is analyzed that this move prepares for the possibility of the opposition party unilaterally passing the Banking Act, Franchise Business Act, and Semiconductor Special Act. Regarding the Banking Act, the content that prohibits reflecting insurance premiums and contributions in the additional interest rate could directly affect bank profits by reducing loan interest rates, putting pressure on the financial sector.

However, additional negotiations between the ruling and opposition parties are necessary regarding the Democratic Party's reform plan to raise the blanket inheritance tax deduction. The People Power Party opposes raising the blanket deduction except for the spousal inheritance tax exemption, arguing that it still maintains a punitive nature that imposes excessive tax burdens. The People Power Party plans to change the current inheritance tax system to an inheritance acquisition tax system so that heirs pay taxes only on the amount they actually receive.