Editorial: Pension and inheritance tax reforms must be addressed before political chaos deepens

People Power Party floor leader Kweon Seong-dong (from left), National Assembly Speaker Woo Won-shik, and Democratic Party floor leader Park Chan-dae pose for a photo ahead of the National Affairs Council meeting in the Speaker’s office at the National Assembly in Yeouido, Seoul, on March 10. / Nam Kang-ho

The ruling and opposition parties in South Korea met on March 10 for a National Affairs Council meeting, but it ended in just 30 minutes with no results. The People Power Party proposed a 43% income replacement rate for National Pension reform, while the Democratic Party of Korea insisted on 44%. This disagreement caused discussions on other issues, like the supplementary budget, to fall apart.

Issues like inheritance tax, the supplementary budget, and the semiconductor special law, which directly affect people’s lives and the country’s future, need to be discussed regardless of the political situation. It’s important to deal with what can be agreed upon first. However it seems like in S. Korean politics, such common sense doesn’t always apply.

On inheritance tax reform, the two parties are quite close. Democratic Party leader Lee Jae-myung suggested that the People Power Party’s proposal to abolish the inheritance tax on spouses should be addressed quickly. The inheritance tax exemption limit has remained unchanged since 1997, and while this change may not be a complete reform, it would be wise to act on the areas where agreement is possible.

Additionally, on National Pension reform, the two parties have very similar views. Both agree on raising the contribution rate from 9% to 13%. The only difference is a 1% gap in the income replacement rate, which, although small, is holding up the reform. The debate over the overall parameters of the reform remains a sticking point.

The National Pension fund already has a daily deficit of 88.5 billion won ($60.6 million), adding up to about $21.9 billion deficit annually. If the reform is delayed over a 1% difference, it would be hard to justify. It seems as though both parties are reluctantly pushing forward, pretending to act while looking for an excuse to back out, given the unpopularity of the changes.

The supplementary budget and semiconductor special law also cannot be delayed much longer. Currently, there is little political cost to pushing for reforms, making this the best time to address tough but necessary changes. If not now, the opportunity for improvements may not come again.

Soon, the Constitutional Court will rule on the president’s impeachment. No matter the outcome, it’s likely to cause political chaos, making reforms even harder. These important issues should be dealt with before that happens.