hankyoreh

Jan. 31. (Photo by Kim Gyoung-ho)　　

Song Ho-jin　

The “welfare debate era” is in full swing. Politicians have issued differing claims regarding plans for funding expanded social welfare programs. Unified voices have also been missing even within different political parties.

The most radical calls have come not from the progressive political parties but from Democratic Party Supreme Council member Chung Dong-young. Chung has called for a “wealth tax” on individuals and corporation based on assets rather than income. Theoretical support for Chung’s argument comes from the Welfare State Society, which has pointed to the need for a “welfare revolution” through bold tax hikes in order to collectively resolve anxieties regarding education, healthcare, retirement, housing, and jobs.

“The universal welfare issue is about the fundamental question of how to go about changing South Korean society,” Chung previously stated.

“We cannot change it through a simple reorganization of tax administration,” Chung also said. “We need a taxation revolution. We must look squarely at the ‘inconvenient truth’ of taxes.”

Progressive political parties agree with the notion of collecting more taxes from high-income groups but are distancing themselves from the idea of a wealth tax. A social welfare tax bill proposed last year by New Progressive Party (NPP) Chairman Cho Seung-soo was structured around assessing additional taxes for individuals and corporations whose earnings exceed a certain level.

The Democratic Labor Party (DLP) has submitted plans for income and corporate tax increases that would raise tax rates for high-income groups and argued for the need to revise the criteria for tax exemptions and reductions. However, it has remained cautious about the institution of new taxes such as a wealth tax or social welfare tax.

During a Jan. 4 Supreme Council meeting, Chairwoman Lee Jung-hee said, “Direct tax-centered increases are essential to alleviate the tax burden ratio and polarization, but tax hikes should not be simply a political slogan. They must have feasibility, a social consensus, and procedural validity, and be complete in terms of legal principles.”

Within the DP, which introduced the comprehensive real estate tax during the Roh Moo-hyun administration only to encounter criticisms about the so-called “tax bomb,” the prevailing sentiment is one of opposition to the increasing of taxes through the creation of new taxes. Representative of this current is Chairman Sohn Hak-kyu. Instead, these members are saying that an effective tax increase effect can be gained by rolling back tax cuts implemented during the Lee Myung-bak administration, and that they will reduce the SOC budget and human resources investment through adjustment of the welfare provision system and reforms to the financial structure.

“The concept is not about a giveaway, but about investing in welfare,” said Lawmaker Kim Jin-pyo, a member of the DP’s Planning Team for Universal Welfare Finances.

But the view internally is that some degree of increase in the tax burden ratio is inevitable if the party’s “3 plus 1 universal welfare” program in the areas of education and health care is to be put into practice.

The ruling Grand National Party (GNP) has maintained the position that tax hikes are unacceptable, responding to the DP’s welfare offensive with arguments about populism or tax bombs. However, it is facing concerns because of the inability to disregard citizen demands for welfare services.

Accordingly, attention is focusing once again on the “tax cut rollback debate” that heated up the GNP in November 2010. At the time, the aim was to ensure soundness of state finances and shed the image of the “rich people’s party,” but because it is an issue of state finances, a link with the welfare financing debate is inevitable.

GNP Chairman Ahn Sang-soo presented a plan for leaving alone the tax cuts for the current highest tax rate bracket of “88 million Won and higher,” (above $78,790) but creating a new “over 120 million Won” bracket above that and applying the current 35 percent maximum rate.

Former GNP Chairwoman Park Geun-hye expressed an opinion in favor of leaving the current rate in place for the 88 million Won and up bracket.

Because the GNP is advocated incremental increases in welfare services, the financing issue is not a major concern.

A lawmaker and associate of Ahn said, “Even with the so-called ‘70 percent welfare,’ we are not talking about applying it right away in all areas.”

“The idea is to gradually increase the scope of welfare services beginning with child rearing and childcare, which do not require that much in the way of resources because the low birth rate problem is so severe,” the lawmaker added.

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