Abstract:
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.