Lee Jae-myung calls it 'false incitement' vs. People Power Party's 'punitive taxation'
Battle Over Scrapping the Long-Term Holding Deduction: Why the Ruling and Opposition Parties Are Speaking Entirely Different Languages
President Lee Jae-myung flatly rejected the opposition's 'tax bomb' claims over the abolition of the long-term special deduction, calling them "clearly false incitement." The ruling and opposition parties have clashed head-on over a core benefit of real estate taxation. People Power Party floor leader Jeong Jeong-sik countered directly, framing the same measure as "punitive taxation of the people." With one side calling it a restoration of fairness and the other calling it punishment over the same system, analysts say this confrontation is not merely a tax-cut debate but a battle over tax framing aimed at next year's general election landscape.
What Changes
The long-term special deduction is a mechanism that sharply reduces capital gains tax when selling a home held for a long period. The deduction rate rises with the length of ownership, so multi-home owners and holders of high-value properties reap the largest tax savings. The government's move to abolish the deduction is interpreted as an attempt to narrow the gap in tax burdens created by real estate. The sticking point is the timing of abolition. Since the change alters a tax structure where liabilities can swing from tens of millions to hundreds of millions of won depending on the holding period, its ripple effects on the market will be far from negligible.
The president's direct rebuttal is notable. For a president to personally label a specific opposition claim as 'false incitement' goes beyond the level of response typically handled by the prime minister or senior policy secretary. It signals that the government views the deduction's abolition not as a routine tax reform but as the center of a political fight. With the tax overhaul, led by Senior Presidential Secretary for Policy Kim Yong-beom, becoming a major line of opposition attack ahead of the general election, the presidential office appears to have jumped directly into the framing battle.
The Opposition's Calculus and the Market's View
The People Power Party's counterattack centers on the tax burden on ordinary households. Floor leader Jeong's use of the phrase 'punitive taxation' appears to be a strategy to widen the interpretation of the deduction's abolition—from a tax hike on a small wealthy minority to an increased burden on all ordinary homeowners. Notably, given that Jeong has already raised President Lee's sale of his Bundang apartment, the opposition is expected to continue an attack line linking the president's personal real estate dealings to government policy.
The impact on the market is also significant. If the abolition is finalized, demand could surge to sell homes before the tax benefits disappear. Conversely, if the perception spreads that holding costs will rise, a flood of listings and downward price pressure could take hold at the same time. With criticism already emerging that President Lee's approval ratings have stalled amid dissatisfaction with his real estate policies, the government faces growing pressure to catch two rabbits at once—restoring tax fairness while keeping the market stable.
A Variable in the Election Landscape
The current standoff is expected to unfold along two tracks. First, the ruling and opposition parties must negotiate in the National Assembly over the timing of the abolition and transitional provisions. A phased reduction, paired with protections for existing homeowners, is likely to emerge as a more realistic compromise than an abrupt repeal. The other track is the continuation of political warfare. Because tax issues hit close to home for voters, the opposition will likely use the long-term deduction as grounds to oppose key ruling-party pledges in the general election. The ruling camp, meanwhile, is expected to package the reform as a restoration of fairness in real estate taxation and an achievement in the pursuit of fairness.
In the end, the outcome will hinge on the numbers. As the actual increase in tax burdens after abolition—and which income brackets bear the brunt—are revealed piece by piece, it will determine which framing, 'false incitement' or 'punitive taxation,' wins over the public.
