The Democratic Party will hold a discussion forum on the theme of 'Inheritance tax deduction reduction' on the 14th. This reflects the situation in which the proportion of taxable heirs has significantly increased over the past decade, indicating that inheritance taxes have expanded to 'middle-class taxation.' At the party level, a tax amendment bill specifying precise figures has also been prepared. This is a rightward shift in taxation after the abolition of the financial investment income tax and the deferral of taxation on virtual assets. It aligns with Representative Lee Jae-myung's approach of expanding the party's base during the early election phase.
◇Inheritance tax reduction for individuals… "Focusing on middle-class with one house"
According to a comprehensive report by ChosunBiz on the 12th, this discussion forum will address ways to alleviate individuals' inheritance tax burden. It focuses on middle-class individuals in major cities who own one 'APT.' The crux is to expand the exemption benefits currently granted only to those with inheritance assets of 1 billion won (5 million won blanket deduction + 5 million won spouse deduction). This is different from the government's proposals to expand the family business succession deduction and lower the highest tax rate as part of easing corporate taxes. The Democratic Party views this essentially as a tax cut for the wealthy.
The forum will be co-hosted by Lim Kwang-hyeon, the policy committee vice chairman from the National Assembly's Finance Committee, and lawmakers Jeong Seong-ho, Kim Tae-nyeon, and Jeong Il-young. Representative Lim is a former vice administrator of the National Tax Service who drafted the initial version of the 'Lee Jae-myung inheritance tax reduction bill' during the last party convention. Representative Kim, as the chair of the party's Economic Security Special Committee, has led the Democratic Party's semiconductor special law.
The forum will be chaired by Representative Lim, while Professor Kim Hyun-dong from Pai Chai University will present on the topic of 'Alleviating the middle-class inheritance tax burden.' Professor Kim noted during last year's discussions on the financial investment income tax that "the financial investment income tax could actually reduce the tax burden for the 'big players'." Attendees will include the Ministry of Strategy and Finance, the Democratic Party's think tank, the Democratic Research Institute, the National Assembly's Legislative Research Service, the Korean Tax Advisers Association, and People's Solidarity for Participatory Democracy.
◇Ruling and opposition parties agree on 'expanding spouse deduction,' but differ on 'corporate taxes'
Reducing the inheritance tax is an area where the ruling and opposition parties have achieved a broad consensus. At the end of last year, there was a tentative agreement to raise the spouse deduction from the current 500 million won to 1 billion won during the Finance Committee's tax subcommittee examination. This was proposed by Representative Lim. It was deemed a 'horizontal transfer of wealth,' recognizing the spouse's contribution to inherited assets. This is seen as different from the 'intergenerational transfer' that has a strong nature of passing wealth down to children. To prevent system abuse, the obligation to provide evidence for spouse inheritance was also discussed.
However, there were significant differences between the ruling and opposition parties regarding the government's proposals for ▲ lowering the highest inheritance tax rate (from 50% to 40%) ▲ expanding the child deduction (from the current 50 million won per person to 500 million won) ▲ and expanding the family business succession deduction, ultimately resulting in the collapse of any agreement. The opposition argues that lowering the tax rate itself, aside from the deduction reduction, is unrelated to the 'middle class.'
The party's policy committee is pondering the 'scope of negotiations' with the ruling party, as they believe that a tax cut policy could attract the centrist voters who hold the balance. Representative Lee lost the previous presidential election by a narrow margin of 0.7 percentage points. This is why Representative Lee is introducing tax cuts, labor time flexibility, and growth-first approaches that differ from the Democratic Party's existing lines.
Jin Seong-jun, the policy committee chairman, recently stated at a press conference that "the inheritance tax burden on the middle class residing in areas such as Seoul has significantly increased compared to before." He emphasized, "There is a need to ease the burden on the middle class by raising the limits on spouse and blanket deductions." He also noted that "last year the government and ruling party proposed an ultra-wealthy tax cut plan and failed to reach an agreement, and I think there is a need to resume discussions on this matter. We intend to pursue that." He added, "It is difficult to process the bill solely by the Democratic Party's will, so we are contemplating negotiation strategies."