Opposition to Lee Government’s Budget and Tax Reform Plan: “We Will Cut the Budget and Withdraw the Tax Hikes”

[Financial News] After the Lee Jae Myung administration unveiled its 820.9 trillion won 2027 budget proposal on the 1st, the opposition strongly protested, calling it “a fiscally reckless, rubber-band budget” and “fiscal disorder,” and warned that it would seek budget cuts. Regarding the revised tax reform plan released the same day, the opposition criticized it, saying, “The core of the tax hikes remains unchanged,” targeting the planned increase in the fair market value ratio and tighter residency requirements for the long-term holding special deduction under the Capital Gains Tax.
Rep. Yoo Sang-bum, the People Power Party’s floor leader on the Special Committee on Budget and Accounts of the National Assembly, held a press conference at the National Assembly’s Communication Hall that day. He criticized the plan, saying, “Next year’s national tax revenue is expected to increase by 194.2 trillion won, yet national debt will rise by another 106 trillion won. When on earth does the government intend to repay its debts?”
The opposition described the creation of a 162 trillion won Future Response Fund, financed with revenue generated by the semiconductor boom, as “the administration’s discretionary slush fund.” It said, “The government is also trying to operate separately the enormous 104.4 trillion won in surplus funds within the Future Response Fund,” adding that the money was “not being spent on support for the public or on necessary projects, but is instead the ‘administration’s discretionary slush fund.’” The lawmakers particularly emphasized that the government could use the fund’s surplus at its discretion and that it should therefore be subject to National Assembly oversight.
The lawmakers also referred to the Bank of Korea’s recent decision to raise the policy rate to 3.0%. Rep. Yoo said, “The BOK has shifted to a tightening stance, but the government is trying to increase the money supply again through expansionary fiscal policy. That is a serious policy mismatch.” He added that the administration was “desperate to flood the economy with money to stay in power.”
People Power Party members of the Finance and Economy Planning Committee held another press conference that day to criticize the tax reform plan. The government had initially announced that it would reduce the basic deduction for the Comprehensive Real Estate Holding Tax for nonresident single-home owners to 900 million won, but later decided to restore it to 1.2 billion won. It had also planned to raise the cap on tax increases to 200%, but decided to retain the current 150% limit.
Rep. Bae Jun-young, the opposition party’s floor leader on the committee, said, “It is fortunate that the government corrected the plan, even if belatedly,” but pointed out that “it stopped halfway.” He argued that the fundamental nature of the tax reform plan—as a measure intended to raise taxes—had not changed. Rep. Bae noted, “The fair market value ratio will rise from the current 60% to 70% in 2027, while it will increase to as much as 80% in 2028 for owners of three or more homes and for homes in designated adjustment-target areas.” He added, “Even if the deduction remains at 1.2 billion won, taxes will rise if the tax base itself expands.”
He continued, “For single-home owners, the Capital Gains Tax deduction will be reduced starting in 2028, and the deduction based on the holding period will disappear entirely from 2029.” He said, “This is a tax imposed on people who have protected one home throughout their lives, yet the government has not left that untouched.” He also urged the government to “withdraw the remaining tax increases and disclose the revised estimates first.”
[email protected] Lee Hae-ram Reporter