The power to tax, the power to destroy

Ko Jung-ae

The author is the editor-in-chief at the JoongAng Sunday. 

It may be hard to appreciate in today’s reality, but political philosopher John Locke said people accepted government so that they could “securely enjoy what they own — liberty, life and property — and live a safe and peaceful life.”

What if government acts otherwise? Locke said, “The people should reclaim the power they have entrusted.” Is that really possible? It is. The United States itself was founded partly in resistance to unjust taxation. But I am not talking about events 250 years ago. A more recent example is California in 1978, when voters approved Proposition 13, which essentially based property taxes on acquisition value. It was the product of a “tax revolt.”

At the time, California home prices had doubled or tripled, and property taxes rose accordingly. Video remains of an elderly woman named Dolores McCormick lamenting that she had paid $646 the previous year but now owed $1,072 — more than $7,500 in today’s money.

Howard Jarvis, who led the backlash, protested that while death and taxes might be inevitable, being taxed to death was not. “We have unlimited government,” he said. “That means unlimited taxation.” He called it a new revolution against arrogant politicians and insensitive bureaucrats whose philosophy was “tax, tax, tax, spend, spend, spend, elect, elect, elect,” driving Americans toward bankruptcy. Does that sound familiar?

After Proposition 13 passed, similar “taxpayer revolts” spread across the United States. More than 10 states, including Massachusetts and Michigan, adopted tax limits. Some required a supermajority, such as two-thirds, rather than a simple majority to raise taxes or tax rates.

The point was not merely to reduce taxes. The revolt sought to constrain the taxing power of government itself, on the premise that political institutions, unless restrained, naturally expand both taxation and spending.

Theoretical backing followed. One example was Nobel laureate James Buchanan and Geoffrey Brennan’s “The Power to Tax” (1980). They viewed government as a “Leviathan,” like a monopoly that seeks to maximize tax revenue by exploiting its authority to the fullest. They treated as inherent truths Chief Justice John Marshall’s dictum that “the power to tax involves the power to destroy” and Montesquieu’s observation that those with power tend to abuse it until they encounter limits.

Taxes on assets are particularly dangerous, unlike income taxes imposed on flows. When land and housing are taxed, taxpayers facing higher rates have few choices beyond paying the tax or selling the property. Property owners, moreover, cannot easily move or conceal the taxable asset when the burden suddenly rises. Again, doesn’t that sound familiar?

There was also a constitutional judgment. In 1992, the U.S. Supreme Court upheld Proposition 13 by an 8-1 vote. It found a legitimate public interest in preventing long-term residents from being driven from their homes by soaring property values and tax burdens, thereby preserving residential stability and continuity in communities. It also recognized a “reliance interest”: Longtime homeowners had planned their lives on the expectation that their tax burden would be based on the prices they had paid for their homes.

I cite the American experience at length because many people seem willing to accept attempts to control real estate through excessive taxation as falling within the legitimate realm of government, even if most are unhappy about it.

Yet, as Locke defined it, one purpose of government is to protect property rights. Taxes on property therefore must be fair and predictable. A policy does not become democratic simply because lawmakers bang the gavel in the National Assembly.

In 2008, Korea’s Constitutional Court upheld the comprehensive real estate tax itself but placed checks on excessive tax burdens. In 2024, however, the court upheld a system even though tax liabilities could rise by as much as 150 percent each year. It was a complacent ruling. That decision has helped produce today’s even more aggressive government drive and greater uncertainty.

During the Park Geun-hye administration, a senior presidential secretary for economic affairs was heavily criticized for saying taxes should be collected “like gently plucking feathers from a goose so it does not feel pain.”

By today’s standards, he was a gentleman.