Local Elections: Populist Pledges Without Funding...Just the Costliest Freebie

A tax structure subordinate to the central government: the power to set tax rates is the answer / Populist campaign pledges without fiscal backing are merely the most expensive kind of freebie / Beyond the warning of “6% fiscal self-reliance,” we must design for “self-sustaining growth,” not a competition in handouts

On June 3, the 9th Nationwide Simultaneous Local Elections will be held. With about three months remaining, large campaign banners of candidates are already hanging on buildings here and there. Ahead of the local elections, local governments are rushing to open their wallets. Although the election is still months away, a war of campaign pledges targeting voters’ bank accounts has already begun.

In January of this year, Jeongeup City distributed prepaid cards worth 300,000 won per person to citizens for use within the region. Gunwi County in Daegu also paid out 540,000 won per person in livelihood stabilization support funds. Boeun County, too, plans to provide a total of 600,000 won per person in livelihood stabilization support over two rounds. Boseong in South Jeolla Province, Okcheon in North Chungcheong Province, and Suncheon in South Jeolla Province are also implementing cash-based programs. The problem is that no one seems interested in where this money is coming from.

According to a survey by the Korea Manifesto Center, comparing the 7th and 8th popularly elected local administrations, the rate of securing fiscal resources for fulfilling election pledges by metropolitan mayors/provincial governors and superintendents of education fell by 22.07 percentage points (from 50.29% in the 7th to 28.22% in the 8th), while the rate for heads of cities, counties, and districts also declined by 10.83 percentage points. For metropolitan mayors/provincial governors and superintendents of education, 17.68% of pledges had a fiscal funding rate of less than 10%. Since these pledges were made despite insufficient funding, the pledge completion and implementation rate, as of the third year in office, dropped by 10.34 percentage points, from 61.96% in the 7th local administration to 51.62% in the 8th.

The fundamental reason this has happened is that, even though the government signaled a shift in policy from expansionary fiscal policy to sound public finance, local government heads did not reduce their dependence on central government funds. Another major cause is that they indiscriminately put forward large-scale pledges, excessively inflating the scale of fiscal planning. This is the result of a flood of campaign promises made without any measures to secure the necessary budget, underscoring the need for policy-based elections. Ultimately, the decline in pledge fulfillment is not a matter of the moral character of local government heads, but an inevitable result of a structural limitation in which local governments cannot design their own revenue sources.

In Korea, the ratio of national tax to local tax is 75 to 25, a structure that is fundamentally designed so that local governments cannot generate revenue on their own. As a result, local governments’ fiscal self-reliance has continued to decline, falling below 50% in 2021 and dropping to 48.6% in 2025. This means that local governments’ own-source revenue is shrinking while their dependence on transfer revenue from the central government is increasing. Yet even this figure is the result of the Seoul metropolitan area pulling up the average. Looking only at basic local governments, the average falls to 27.2%, and at the county level it is only 17.2%. In the case of Yeongyang County in North Gyeongsang Province, the fiscal self-reliance ratio is 6.1%, meaning 94% of its budget depends on the central government.

The core of genuine fiscal decentralization lies not in the amount of money, but in where decision-making authority resides. No matter how much revenue is transferred to local governments, if they cannot set tax rates themselves, they remain merely implementing agencies of the central government. In Korea’s fiscal structure, local governments are responsible for expenditures, but revenues depend on the center. The gap is filled through transfer revenues such as the Local Shared Tax and national subsidies. In a structure where local governments spend more money received from above than money they collect themselves, their policy incentives are bound to be directed not toward residents, but toward the central government.

Federal countries such as Germany (53.7%) and the United States (41.6%) have local tax shares of over 40%, while unitary states similar to Korea, such as Sweden (44.5%) and Japan (37.5%), also maintain local tax shares around 40%. Major advanced countries show high levels of local decentralization. The essence of a high local tax share and local decentralization is that responsibility and authority are located in the same place: the entity that collects taxes is also the entity that spends them. In contrast, in Korea, the authority to create new tax items and adjust tax rates is concentrated in the central government, leaving local governments closer to tax collection agents than true taxing authorities.

This is why the 75:25 ratio of national to local taxes must be rebalanced and the authority to set local income tax rates must be transferred to local governments. The moment local governments gain the power to raise or lower tax rates, they will simultaneously have both the incentive and the responsibility to design tax rates according to the preferences and needs of local residents, rather than the directives of the central government. Only then does true fiscal decentralization begin.

Alongside fiscal decentralization, the real task is economic decentralization. Each region must build a sustainable economic system of its own. When local governments acquire the capacity to directly plan and take responsibility for deregulation suited to local characteristics, industrial development, and investment attraction strategies, an economic ecosystem can emerge in which local businesses and residents can thrive together on their own.

In the end, the starting point depends on voters. We were taught in school not to vote for candidates who promise to buy us hamburgers. Campaign pledges without fiscal backing are fiction, and public finance without accountability is waste. The moment we cast our vote for populist promises of “how much will be given,” we are choosing the most expensive freebie of all.

Hyun-jo Choi, Researcher, Center for Free Enterprise (CFE)

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Original title: 지방선거, 재정 없는 포퓰리즘 공약...가장 비싼 공짜일 뿐

Author: Hyun-jo Choi

Date: 2026-04-02

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28772