Should the government cut in come tax or not? Lawmakers are at odds over cuts scheduled for 2012, which was one of President Lee Myung-bak¡¯s key campaign pledges.

According to the policy, the government is set to reduce the rate on individual incomes in excess of £Ü88 million (US£¤1=£Ü1131) from 35 percent to 32 percent and corporation income tax in excess of £Ü200 million, from 22 percent to 20 percent in 2012.

The main opposition, the Democratic Party has long been voicing opposition to the cuts for both high-income individuals and corporations. They denounce the Lee administration? policy for favoring the privileged at the expense of the underprivileged, which runs counter to a fairer redistribution of wealth.

Opponents also point out that tax cuts are not warranted since the proportion of total income tax revenue from the product is relatively low. For example, in 2007, it was just 21 percent, much lower than the OECD average or 26.7 percent, according to a report by the Ministry of Strategy and Finance.
¡±Under these circumstances, reducing tax on maximum incomes and corporate tax rates will deplete the national coffers,¡± said Lee Yong-sup, the Democratic Party¡¯s ranking member of the National Assembly¡¯s Strategy and Finance Committee.

They also cite U.S., in which tax cuts for the wealthy during the Bush administration led to speculation, instead of stable consumption. This weakened the financial system and threw the whole economy into crisis, impoverishing the already struggling middle -class population further.

On the other hand, supporters of tax cuts emphasize they can facilitate corporate investment. This will also stimulate demand and help create jobs, which in turn can revitalize the economy.

At the same time, they point out that the cut will worsen the government? fiscal health and may increase the burden on mid and low-income earners in the form of heavier indirect taxes and higher public service charges to make up for the revenue lost from the cuts.

The political community is planning to renew debate on the issue opening it to the academic and businesses communities regarding this tax cut issue.