Real Estate Policy Confusion: President Lee Jae-myung Without Apology

The government has effectively withdrawn a plan to strengthen the comprehensive real estate tax burden on non-resident single-home owners, just one month after announcing the measure.

The government announced its tax reform plan on the 3rd of last month, proposing to lower the basic deduction for comprehensive real estate tax on non-resident single-home owners from the current 1.2 billion won to 900 million won, and to increase the tax burden ceiling from 150% to 200%. The intent was to protect primary residences while strengthening the tax burden on non-resident properties.

The market responded with opposition, arguing that single-home owners who cannot live in their own homes due to reasons such as job transfers, children's education, and family care would face excessive tax burdens.

The ruling Democratic Party of Korea also demanded at a high-level government-party coordination meeting on the 23rd of last month that the government ease or eliminate the distinction between resident and non-resident single-home owners.

Ultimately, at a State Council meeting on the 1st, the government decided to restore the basic deduction for non-resident single-home owners to the current 1.2 billion won and maintain the tax burden ceiling at 150%. The key provisions of the original plan were effectively reversed just 29 days after announcement.

The government and ruling party characterized this revision as a result of opinion gathering rather than a withdrawal due to policy error.

Han Byung-do, the Democratic Party floor leader, evaluated the revised tax reform plan as "a rational result achieved through listening to public and market opinions and deliberation by the government and party." The Ministry of Finance and Economy also stated that it had prepared rational improvement measures reflecting government-party discussions and public opinion.

President Lee Jae-myung directly refuted criticism of policy retreat and inconsistency.

On the 2nd, President Lee wrote on his social media: "Is changing one's policy stance unjust and adhering to it unconditionally right?" adding that it is "merely a matter of policy choice where preferences intersect."

However, the president's post contained no apology or expression of regret toward single-home owners who experienced confusion due to the initial tax proposal. Neither Blue House statements nor public remarks from Democratic Party leadership acknowledged design errors in the original plan or offered apologies to the public.

In previous administrations, when major policies retreated or failed to achieve their objectives, the president or ruling party often issued apologies or acknowledged governmental responsibility.

Former President Roh Moo-hyun acknowledged responsibility in December 2006, stating: "If the government acknowledges that it has made trial-and-error mistakes in policies, the biggest one is real estate." He subsequently expressed his determination to prevent further deterioration of the real estate market.

Former President Lee Myung-bak held a special press conference in 2008 when candlelight vigils spread in opposition to U.S. beef import negotiations. He apologized, saying he had failed to carefully consider what the people wanted.

Former President Park Geun-hye scaled back her campaign promise to provide all seniors with 200,000 won monthly in basic pensions in 2013 while expressing regret to the public. While explaining it was an unavoidable adjustment due to fiscal conditions, she apologized for failing to fully keep the campaign promise.

Former President Moon Jae-in stated in his 2021 New Year's address: "I feel very sorry toward the public who are greatly discouraged by the difficulties of housing issues." At a subsequent New Year's press conference, he stated: "We failed to stabilize the real estate market," acknowledging that the policy goal was not achieved. Democratic Party leadership at the time also issued a formal apology for the failure of real estate policy.

However, the president has not always apologized each time a policy was modified or withdrawn. In cases where policies were changed before legislative implementation or National Assembly passage, such changes were classified as opinion-gathering or supplementation processes, and separate apologies were often not issued.

The current tax reform plan was also revised before National Assembly passage and implementation, distinguishing it from failures of already-implemented policies. The government can argue that it supplemented problems before legislation by accepting opinions from the market and political circles.

However, comprehensive real estate tax is a system that directly affects housing retention, rental, and disposal. Since the government reversed core taxation standards just one month after official announcement, some argue that the government should explain the initial plan's design and review process, as well as reasons for revision to the public, and express regret over the confusion caused.

The Democratic Party is also considering raising the basic deduction for non-resident single-home owners to 1.4 billion won, the same as for resident homeowners, during National Assembly review. There also remains the possibility of additional adjustments to fair market value ratios and long-term ownership special deductions.

One political circle source stated: "It is entirely possible for policy content to change during deliberation processes before policy implementation," while adding: "Since government policies have significant market impact and can lead to different choices by the public, expressions of apology or acknowledgment of responsibility could help restore public confidence."

전시언 기자 yourside@news-s.kr