The Korean Economic Forum
Equity in the Taxation of Labor and Asset Incomes
Byung Mok Jeon (Korea Institute of Public Finance) and Chul-in Lee (Seoul National University)Year 2021Vol. 13No. 4
AbstractThis study analyzes the equity in tax burden between labor income and asset income from savings and various forms of asset. The optimal taxation theory supports the validity of capital income taxation. Consideration should be given to macroeconomic stability and the theory supports a single tax rate approach to asset incomes. The estimated tax burden by asset income type and income level is generally higher than labor income in Korea, and the gap among asset income taxes is also found to be significant. We need to moderate high tax burdens and narrow the taxation gap among assets. In particular, the level of taxation on housing investment is very low and needs revision. The redistribution effect at the household level due to taxation of asset income was not significant.