The Impact of the Property Tax Sharing System on Fiscal Equities Among Local Governments in the Seoul Metropolitan Area
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Local governments are primarily concerned with the well-being of the population within their jurisdictions. The unequal spatial distribution of property tax, which is a main source of local revenues, can result in differences in the quality of public services provided across localities in the metropolitan area. Like other metro areas, Seoul has problems caused by fiscal inequities among localities. Since the self-governing local system was established in 1995 in Korea, it has been suggested that some steps should be taken in order to alleviate these inequities. Property tax sharing is currently under consideration. Therefore, this study examines what kind of sharing model would be most effective so as to reduce fiscal disparities among localities in the Seoul metropolitan area, in terms of lowest administrative effort and cost of implementation, greatest public support, and maximum equalization. To better understand property tax sharing policy approaches, this paper evaluates the effectiveness and limitations of the existing property tax-base sharing program adopted in the Twin Cities metropolitan area of Minnesota in the U.S. After considering the costs and benefits of the Twin Cities program, this study recommends a property tax sharing system for Seoul where 50 percent of each locality’s entire property tax revenue be contributed to a pool, and the money redistributed to each locality, based on its share of the area’s population and its relative property tax wealth.