Fourteen lawmakers from South Korea’s main opposition Democratic Party (DP) have introduced a bill to amend the National Finance Act. The proposed revision would add “reducing polarization among classes, regions, and industries” and “stabilizing the livelihoods of vulnerable groups” as criteria for supplementary budgets. The law allows such budgets only in cases of war, major disasters, economic recession, mass unemployment, and significant internal and external changes.
The bill is reviewed to support former DP leader Lee Jae-myung’s promise to distribute 250,000 won per person. The government previously stated no legal basis for such a supplementary budget, prompting the proposed changes. Critics argue that the 250,000 won cash handout would not effectively reduce polarization or stabilize the livelihoods of vulnerable groups, as it is not targeted at them. They also express concerns about using legislation for political populism.
This proposal is one of several populist measures from the DP. Other bills include the Grain Management Act, the Act on Distribution and Price Stabilization of Agricultural and Fishery Products, legislation for salaried caregiving, and a tax deduction for telecommunication expenses. These proposals are projected to cost hundreds of billions to trillions of won, adding to national debt.
The DP’s amendment also aims to limit tax cuts. With the tax base strained by slow economic growth, a declining birthrate, and an aging population, further tax cuts could reduce revenue. The Moon Jae-in administration exceeded statutory limits on tax cuts in 2019 and 2020, with reductions of 13.9% and 15.4%, respectively, surpassing the legal boundaries of 13.3% and 13.6%. Now, in opposition, the DP seeks to mandate limitations on tax cuts. While the tax cuts can stimulate the economy, they should be used appropriately to boost investment.
If the DP is concerned about national finance, it should advocate for a fiscal rule to cap the national deficit size. However, the DP opposed and defeated such a measure in the 21st National Assembly. The current proposal is criticized as a populist move that could worsen national finances.