Regulations and Taxes That Hurt Families Must Be Removed

Individuals achieve better lives through family. The problem is that once people become part of a family, there are many regulations that disadvantage them. If becoming part of a family means suffering greater losses in taxes and various other areas, the incentive to avoid forming a family or to break one up will grow.

Our society recognizes low birthrates as a serious social problem. There is also great concern about population decline. Moreover, the government spends enormous fiscal resources in an effort to ease the low-birthrate phenomenon. But if it does not remove the disadvantages imposed on family members, it will be difficult to expect results no matter how much money it spends. It is merely a mismatched policy, like pressing the accelerator while keeping the brakes on.

In modern society, the growing share of single-person households is a natural phenomenon. But it is undesirable for single-person households to increase because policy and taxation impose disadvantages on families. Allowing people to form families and live as families is something the government should properly protect through institutions, not obstruct through regulation. It is necessary to remove regulations that impose disadvantages and implement incentive policies that enable family formation.

Taxes are the first area that should be considered. In some areas, the tax burden rises as the number of family members increases; in others, taxes decrease when a family is dissolved. Taxation of this kind is wrong and socially harmful. If taxes undermine the family, which is the foundation of our society, then they must be corrected.

The inheritance tax is imposed in the manner of a death tax, which creates disadvantages when there are many family members. If one person inherits the same amount as another, the person in the larger family may bear a heavier tax burden. In this way, the current inheritance tax is poorly designed, and it should be abolished and replaced with a more reasonable system.

Larger households need larger homes. The problem is that owning a larger home brings disadvantages. Not only are acquisition and registration taxes high because they are structured progressively at the purchase stage, but the property tax paid to maintain the home is also progressive, making the disadvantage substantial. Imposing taxes on large homes through a progressive rate structure is wrong because it disadvantages larger households. The tax structure needs to be changed.

Most real estate-related taxes, including property tax and the comprehensive real estate holding tax, are unfavorable to larger households and families. For single-person households, relative tax advantages are greater, which gives people an incentive to split into single-person households. The fact that sham divorce, rather than sham marriage, is emerging as a social problem reveals just how unfavorably the system operates toward families. Moreover, the core of the family is the married couple, yet because the gains from dissolving the family are so great, sham divorce and similar practices are becoming social problems. The problem is that although a divorce may begin as a sham, living apart can eventually lead to a real divorce.

In housing ownership policy, larger households are placed at a severe disadvantage. Because of the one-house-per-household policy, it effectively amounts to prohibiting individuals from purchasing homes separately. Even ordinary banks impose regulation-based discrimination at a serious level. This is a grave threat to individual property rights and a misguided policy that destabilizes the family system, so it should be abolished.

Taxes should be universal and reasonable. But current real estate-related taxes have been distorted into real estate countermeasures and have strayed from the proper role of taxation. They are being abused as tools of the government’s real estate policy and are even threatening the household, the basic unit of life. If there are issues in real estate that need to be addressed, they should be resolved through real estate policy, not by abusing and damaging the tax system.

The structure of the individual income tax is also unfavorable to families. There are deductions for family members, but from the standpoint of total household income and consumption, they are minimal and merely formal. Given that household income is in reality created through spousal cooperation and that expenses are jointly borne, efforts are needed to reform the tax system so that households can choose a method of taxation based on total household income. For example, under the family deduction system for income tax, one could also consider a method of dividing total household income among household members and taxing it on a per-person basis.

The surcharge system for electricity rates is difficult to understand. It is a major problem that power companies set rates using a surcharge structure. This is partly the result of a long-standing policy of treating electricity charges as if they were a tax and encouraging people to conserve, but it also clearly reflects excessive government control and is a backward method of rate-setting that should be corrected urgently. The fact that rates are controlled as a policy instrument according to irrational government standards must be addressed without delay. Applying progressive rates that set charges disadvantageously for larger households is something companies should not be doing and is socially harmful. Gas rates are not much different.

Everyone agrees that energy should be conserved and used less. Individuals can save money, and socially it is necessary for environmental improvement. But the social call for conservation has been applied through excessive rate controls, and as a result it has become a threat to families. This is nothing more than government rate control that should be eliminated.

If institutions that are supposed to protect individuals and families instead play a role in dismantling households, then this should clearly be corrected. If living as a single-person household rather than forming a family means a lower tax burden, then that is a policy that induces family dissolution and is socially harmful. Real estate tax制度 must now be shifted away from serving as a tool of government real estate policy and converted, as befits an advanced country, into a universal and reasonable system. In addition, the various regulations and charges that disadvantage families should also be improved as part of a broader normalization effort.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 가족에 불이익 주는 규제와 세금, 해소해야

Author: Sung-no Choi

Date: 2023-11-08

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=26121