[비즈한국] The Lee Jae-myung administration has drafted next year's budget at 728 trillion won, an 8.1% increase from this year, setting artificial intelligence (AI) investment, protection for the vulnerable, and life-cycle support as its primary goals. The move signifies a focus on intensive investment in cutting-edge industries for national development, while simultaneously strengthening support for those who may be marginalized by such progress.
However, recent trends show that the income gap between high-income and low-income groups, which had been on a downward trend, has expanded under the Lee Jae-myung administration. Furthermore, it is projected that if the tax law amendments proposed alongside next year's budget are implemented, the overall tax burden will increase, but the tax burden for high-income groups will decrease significantly compared to that of low-income groups. In effect, the protection for the socially disadvantaged and vulnerable promised by the Lee Jae-myung administration is not functioning as intended.
President Lee explained the rationale for the budget proposal during his "2026 Budget Address" at the National Assembly on the 4th. After highlighting the expansion of AI investment as the first priority, President Lee stated, "Second, we will provide robust protection for the lives of the vulnerable and firmly safeguard the lives and safety of our citizens," announcing plans to provide a monthly livelihood benefit of over 2 million won for low-income four-person households.
President Lee emphasized, "While new technological advancements contribute to improving the quality of human life, they also cast a shadow by widening gaps," adding, "It is a fundamental duty of the state to protect the socially disadvantaged and vulnerable who are most quickly and severely impacted by the shocks of changing times."
Although President Lee is highlighting the improvement of the lives of the socially disadvantaged, including low-income households, as a policy direction, the income gap between high and low-income groups has actually grown since the Lee Jae-myung administration took office. According to Statistics Korea, as of the first half of this year, for households with one or more persons nationwide, the average monthly income of the top quintile (top 20% by income) was 9.235671 million won, while the average monthly income of the bottom quintile (bottom 20% by income) was 1.026497 million won.
This is because the income of the bottom quintile decreased by 1.29% compared to the first half of last year (1.017537 million won), while the income of the top quintile increased by 2.73% compared to the first half of last year (3.056248 million won). As a result, the income quintile share ratio, calculated by dividing the top 20% income by the bottom 20% income, recorded 9.70 times in the first half of this year. The quintile share ratio is a representative index showing the state of wealth distribution; a higher value signifies greater income inequality.
The quintile share ratio reached a record high of 10.55 in the first half of 2019 (the first period for which comparison is available), then moved to 10.27 in 2020 and 10.11 in 2021, before falling below 10 to 9.76 in 2022. It rose slightly to 9.86 in 2023 but fell back to 9.46 in 2024. However, it has returned to an upward trend this year, expanding to 9.70.
Another problem is that the tax law amendments proposed by the Lee Jae-myung administration alongside next year's budget may further widen the income gap. According to the National Assembly Budget Office, if the government's tax amendments pass the National Assembly, national tax revenue is expected to increase by a total of 37.804 trillion won over the five years from 2026 to 2030. This is because the Lee Jae-myung administration pushed for tax increases through measures such as raising corporate tax rates and securities transaction tax rates. It has been eight years since 2017 that the government has pursued a tax-increasing tax law amendment. The National Assembly Budget Office estimated that out of the national tax revenue, corporate tax revenue would increase by 18.8122 trillion won, securities transaction tax by 12.7967 trillion won, and value-added tax by 978.7 billion won over the next five years.
Conversely, income tax revenue is estimated to decrease by 1.6274 trillion won. The scale of the income tax decrease is projected to start at 5.3 billion won in 2026, rise to 233.8 billion won in 2027, and subsequently exceed 400 billion won annually in 2028 (496.1 billion won), 2029 (460.1 billion won), and 2030 (432.2 billion won). However, the effects of this income tax reduction are expected to be concentrated on high-income earners. This is because the government has introduced measures such as separate taxation for dividend income from high-dividend companies, expanded credit card income deduction limits based on the number of children, and tax support for private lessons in arts and physical education for lower-grade elementary students, the benefits of which are primarily enjoyed by high-income earners.
The National Assembly Budget Office estimated that individual tax burdens, including income tax, would decrease by a total of 1.765 trillion won over the next five years. Of this, the reduction in the tax burden for the working and middle class was only 58.1 billion won, while the reduction for high-income earners was approximately three times higher at 1.7069 trillion won. In particular, while the tax burden for the working and middle class will decrease until 2028, it will rise again to 8.8 billion won in 2029 and 32.3 billion won in 2030. In contrast, the tax burden for high-income earners is estimated to decrease by approximately 470 billion won each year starting from 2028.