Taxes Must Look at the Process, Not the Amount

Taxes Must Look at the Process, Not the Amount

— To understand a person’s economic present, you must look at no less than three generations of time

When we talk about economic inequality, we mostly measure current income and current assets. Income and assets are core indicators of economic welfare and inequality, so this approach is itself necessary.

But current income or assets alone cannot fully explain how a person’s economic position was formed. International organizations and economic research have long studied the fact that income, education, and socioeconomic status are linked between parents and children, and that this intergenerational continuity has an important effect on social mobility and the distribution of opportunity.

The World Bank likewise maintains intergenerational income mobility as a separate international comparative indicator, and the Global Database on Intergenerational Mobility released in 2025 provides estimates of intergenerational income mobility for 87 economies. This shows that to understand a person’s economic position, the relationship between the parent generation and the child generation needs to be measured in its own right.

So the first thing we must change is not the tax rate but the time axis of measurement.

We must not stop at looking at the current amount; we must also look at the life course through which that amount was formed and at what resources and risks moved between generations. The OECD likewise treats social mobility as a concept that includes not only the relationship between parents’ socioeconomic position and children’s attainment, but also how a person’s economic and social position changes over their own lifetime.

1. The Same Amount Does Not Mean the Same Economic Reality

The mere fact that two households have identical current net worth is not enough to judge that their economic conditions are identical.

Assets can consist of different forms — housing, financial assets, business assets — and corresponding debts exist as well, so the composition of assets and the debts must be seen together. The OECD also explains that housing assets and housing debt must be considered together when analyzing a household’s economic position.

Going further, even identical current assets can have different formation processes depending on whether they were accumulated through saving out of labor income, formed through business activity, the result of rising house prices, or the result of intergenerational transfers. Economic research indeed analyzes separately how inheritance, gifts, and family background relate to the distribution of wealth.

So the amount shows the outcome, but the amount alone cannot show the path by which that outcome was made.

This is not a merely philosophical claim.

The very fact that the OECD analyzes inheritance and gift taxation as a distinct policy area, and examines the effect of inheritance on wealth inequality and economic opportunity, shows the need to see intergenerational resource transfers as separate from current assets.

2. Wealth Is Not Made Suddenly in One Generation

An individual’s economic position is not determined by their own labor-market performance alone.

The OECD has continuously studied the intergenerational continuity that exists between parents’ socioeconomic background and children’s education, income, and social position, and explains that differences in this intergenerational mobility can be linked to differences in opportunity.

The World Bank likewise measures intergenerational income mobility by country, and recent research addresses how the environment at birth and parents’ socioeconomic conditions connect to later economic outcomes.

So to understand the economic position of the current generation, we must at least look at the conditions of the parent generation as well.

But we need to go one step further.

Even the parent generation may not be enough.

Because the asset accumulation and socioeconomic conditions of the grandparent generation can shape the starting point of the parent generation, and the parent generation’s starting point can in turn shape the starting point of the child generation. Studying this structure requires an approach that links the life courses of multiple generations. The OECD’s research on the intergenerational transmission of disadvantage likewise treats the passing of economic and social characteristics and experiences from parents to children as an important object of study.

So extending the minimum time unit of policy analysis to three or more generations is worth examining as a research and policy-design hypothesis.

3. What Matters Is Not the Size of the Assets but the Process That Made Them

The fact that someone currently holds one billion won cannot by itself explain everything about what that one billion won means economically.

Because the structure of intergenerational resource movement differs depending on whether the assets were formed through decades of labor and saving, through business, through rising house prices, or through transfers from parents or grandparents. The existence of research that separately estimates how much inheritance, gifts, and family background contribute to wealth inequality exists precisely to analyze these differences.

So the social accounting of the future cannot be sufficient if it records only the stock — the size of assets currently held.

It must also record the flow — how assets and income were formed and moved over time.

This does not mean denying current assets.

On the contrary, it means looking at the formation process together, in order to understand current assets more accurately.

4. What Moves Between Generations Includes Not Only Assets but Support and Burden

Intergenerational economic relationships do not consist of inheritance and gifts alone.

Parents can provide adult children with many forms of support — housing, education, living costs, advice — and a 2024 study by the Korea Institute for Health and Social Affairs likewise reports that parental support for children in early adulthood consists of multiple dimensions: not only economic support but everyday and emotional support and advice. It also analyzes that the level of support differs by the parents’ class position.

Other Korean research likewise analyzes adults’ co-residence with parents and the transfer of economic resources from parents as an important part of intergenerational relations.

So to properly measure intergenerational resource movement, simple inheritance or gift amounts are not enough.

How to define and measure life-course support — housing support, education support, living-cost support, startup support — becomes an important research task.

Conversely, intergenerational relationships also contain movements of burden.

Because the economic relationship between parents and children can include mutual support and exchange of resources rather than one-way transfers, policy needs to consider not only asset transfers but also the structure of care and support within the family.

5. Therefore ‘Rich’ and ‘Poor’ Must Not Be Defined by One Current Amount

Current assets and income absolutely must be measured.

Korea’s official Survey of Household Finances and Living Conditions likewise surveys households’ assets, debts, income, and expenditure to assess household financial health and income distribution for policy and research. The 2025 survey recorded, as of the end of March 2025, average assets of 566.78 million won, average debt of 95.34 million won, and average net worth of 471.44 million won; the Gini coefficient based on equivalized disposable income for 2024 was announced as 0.325.

But while these current indicators are strong at measuring the current state, they are not indicators that explain the entire long-run path by which that state was formed.

So the point is not to abolish current asset and income statistics, but to place them on the time axis of lifetimes and generations.

Current assets can be seen as the outcome variable, and intergenerational transfers and lifetime accumulation as the path variables through which that outcome is formed.

These two must be distinguished.

6. At the Heart of Social Discontent, Too, Lies the Difference Between ‘Amount’ and ‘Process’

If we interpret economic discontent simply as a problem of current income or asset gaps, we may miss something important.

Because the way people accept economic differences can include how they perceive the process by which those differences were made.

This is also why research on intergenerational social mobility exists.

The OECD treats the relationship between parents’ socioeconomic status and children’s attainment as a core aspect of social mobility, and explains that reducing opportunity gaps matters not only for equity but for the realization of individual potential and for productivity.

Recent OECD research likewise analyzes that in some countries parents’ socioeconomic background is linked to children’s attainment, and in particular that able young people from less affluent families can face economic constraints.

So when analyzing social discontent as well, rather than asking only

“Who has how much?”

it is necessary to also ask

“Through what generational and socioeconomic path was that difference made?”

— both questions together.

This is exactly why we must move from amount-centered analysis to process-centered analysis.

7. But the Process-Centered Approach Is Not a Logic of ‘Heirs Are Bad’

This distinction must be made absolutely clear.

The conclusion that intergenerational asset transfers are in themselves unjust does not follow automatically from the research.

Families transferring assets to children is a normal economic behavior seen in many societies, and parents supporting their children’s education or housing is likewise an important part of family relationships. The Korea Institute for Health and Social Affairs study also analyzes parental support as a multidimensional phenomenon connected to education, employment, and housing in early adulthood.

So the goal of policy must not be to eliminate all intergenerational transfers.

The policy questions are rather

Which transfers are a family’s normal risk-sharing and support for children?

And

What level of intergenerational resource concentration affects social mobility and fairness of opportunity?

— those are the questions to ask.

The OECD likewise does not treat inheritance tax merely as a means of fiscal revenue, but examines it from the perspectives of equity, efficiency, and administrative cost, analyzing the design of inheritance, gift, and estate taxation as an important policy variable.

8. So Tax Reform Must Be a Reform of the Measurement System Before a Reform of Tax Rates

Today’s tax debates mostly revolve around rates, deductions, and tax bases.

But the more fundamental question is how accurately the government is measuring economic capacity.

The OECD explains that different capital-related tax instruments — net wealth taxes, capital income taxes, inheritance and gift taxes — target different economic bases, and that the interactions among them must be considered together.

So long-term tax reform requires a statistical infrastructure that analyzes income, assets, debt, capital income, and inheritance and gifts not as mutually independent numbers, but connected within the flow of lifetimes and generations.

This is not an argument for immediately introducing a new tax.

It is an argument to measure first, then design.

9. Let Us Build a ‘Three-Generation Life Account’

Then we can propose a new policy infrastructure.

Provisionally: the “Three-Generation Life Account.”

The purpose of this account is not to monitor specific individuals or invade family privacy, but to use anonymized, statistical data to measure intergenerational economic movement and social mobility more accurately.

Considering that the World Bank already maintains the Global Database on Intergenerational Mobility measuring intergenerational income mobility by country, and that the OECD also compares intergenerational social mobility internationally, systematizing intergenerational economic movement as a policy indicator is not in itself a new idea.

But we must go one step further here.

Not only current income or parents’ income, but

grandparents’ starting conditions → the parent generation’s lifetime income and asset accumulation → the current generation’s starting conditions → the current generation’s lifetime outcomes → the next generation’s starting conditions

— making this time axis the basic structure of policy analysis.

10. What Must Be Recorded

First, the flow of income must be recorded.

Labor income, business income, capital income, and public transfers — the main economic flows of individuals and households need to be seen from a life-cycle perspective. Korea’s Survey of Household Finances and Living Conditions already surveys household income together with assets and debts, so it can be an important foundation for this long-term statistical infrastructure.

Second, the flow of assets and debts must be recorded.

The OECD likewise explains that seeing the distribution of housing assets and housing debt together is important for understanding the effects of housing-related policy.

Third, intergenerational transfers must be recorded.

Not only inheritance and gifts, but how to make statistics of the many forms of parental support — education, housing, living costs — must be researched. The Korea Institute for Health and Social Affairs analyzes that parental support consists of multiple dimensions beyond economic support and differs by class.

Fourth, intergenerational burdens must be recorded.

Burdens such as supporting parents, raising children, and economic support within the family also determine a generation’s disposable resources, so they need to be measured as part of the life course. Korean research on generational relations likewise analyzes co-residence and transfers of economic resources between parents and adult children as important intra-family economic relations.

Fifth, economic mobility must be recorded.

Not only current asset or income levels, but how much one’s economic position has changed compared to the parent generation must be measured as well. The fact that the OECD and the World Bank already treat intergenerational income and socioeconomic mobility as a distinct field of research and statistics provides the foundation.

11. Here Is Where AI Enters

Such a system can be a far more realistic research project now than in the past.

States and international organizations already use large-scale administrative and statistical data to measure income, assets, and social mobility, and the World Bank and the OECD are developing these into internationally comparable databases and research systems.

AI’s role is not simply to collect more of this data.

AI’s important role can be to connect data from different times and domains to analyze complex life paths.

For example: analyzing how one generation’s accumulation of housing assets connects to the next generation’s education, the following generation’s income and entrepreneurship, and the next generation’s asset formation.

But such a system must not violate personal privacy and data protection.

So an actual policy system must presuppose strong safeguards: data minimization, purpose limitation, anonymization and pseudonymization, access control, and limits on the scope of statistical disclosure.

AI must be a tool for measuring the structure of society more accurately, not a tool for surveilling individuals.

12. Taxes Must Not Become an Institution That Judges a Person’s Present

Tax is an institution by which society raises needed public revenue, and at the same time a policy instrument that affects economic behavior.

So a good tax system cannot be designed by the question “from whom shall we collect how much more” alone.

We must first ask what economic capacity is being measured.

Current income?

Current net worth?

Capital income?

Intergenerational transfers?

Or how all of these elements combine on the time axis of lifetimes and generations?

The OECD’s tax research likewise explains that net wealth taxes, capital income taxes, property-related taxes, and inheritance and gift taxes have different tax bases, and that the efficiency, equity, and administrative aspects of each must be considered.

Therefore the tax system of the future must not be a system that unconditionally converts more information into more tax, but a system that uses more accurate information to design more precise policy.

13. What We Want Is Not Identical Outcomes but Trust in the Process

The claim that everyone must hold identical assets is not a realistic policy goal.

Because people differ in labor, choices, ability, risk-taking, saving, and investment, differences in economic outcomes can arise.

The problem society must solve is not to erase all differences, but how to soften the excessive entrenchment, across generations, of differences in starting points and opportunities.

The OECD treats social mobility and equality of opportunity as important not only for economic equity but for the use of individual potential and for productivity.

So the goal of policy can be set not at making every family unable to pass anything to their children, but at softening the structure in which a family’s economic background excessively determines a child’s future.

Seen this way, the tax system can become not an institution that punishes success, but an institution that adjusts the entrenchment of intergenerational opportunity.

14. Society Needs Numbers, but Numbers Alone Are Not Enough

Numbers are necessary.

Income must be measured.

Assets must be measured.

Debt must be measured.

Taxes must be measured.

Inheritance and gifts must be measured too.

But numbers alone cannot tell us the process by which those numbers were made.

So we must place the numbers on a time axis.

Current numbers + the life course + intergenerational movement

These three must be present together.

Current assets are the outcome at one point in time.

Lifetime income is a flow across time.

Intergenerational transfers are the connection between generations.

Economic mobility shows how that process changed the position of the next generation.

Only by connecting these four can we understand a person’s economic position more accurately.

15. The Proposal of a Minimum of Three Generations

Why three generations?

Look at one generation and you see the present.

Look at two generations and you can see the relationship between parents and children.

Look at three generations and you can observe the continuous structure of accumulation and movement: grandparents → parents → the current generation.

And if you connect what the current generation passes on to its children, you can see into part of a fourth generation.

So a reasonable research design can take a minimum of three generations as the basic unit of analysis, adding a longer historical time axis where the data allows.

The important thing is not that the number three is an absolute scientific boundary.

The core is not treating one generation’s present as the outcome of that generation alone.

It is to include, among the basic assumptions of policy, the fact that generations are connected.

16. The Questions of the New Social Accounting

Then the questions government must ask also change.

“How much does this household have?”

— it does not end there.

“How were those assets formed?”

“What labor and risk were in that process?”

“What resources were received from the previous generation?”

“What burdens are owed to the previous generation?”

“What resources will the current generation transfer to the next?”

“As a result, how does the next generation’s economic starting point change?”

These questions do not replace the current asset surveys — they extend them.

And that extension is precisely the key to understanding the intergenerational economic structure more accurately.

Conclusion

For too long we have looked at a person’s economic position only through current numbers.

But a person’s present is not the outcome of the present alone.

That present contains the choices of the parent generation, and the parents’ present contains the conditions of the generation before them.

Research in economics and by international organizations continuously shows that income, education, and socioeconomic position are connected between parents and children, and that intergenerational mobility differs across countries and classes.

So to understand economic inequality, measuring the current amount is not enough.

We must look at the process by which that amount was made.

Do not stop at seeing who has how much —

see from what starting point they began,

how much they labored,

what risks they bore,

what assets they accumulated,

what debts they carried,

what education and housing support they received,

and what resources they transferred to the next generation.

That is the way to understand economic reality more accurately.

And from this perspective we need to look at social discontent again.

Not every cause of social discontent can be explained by the intergenerational economic structure alone.

But the fact that people, when looking at economic differences, can care not only about the size of outcomes but about the process and the structure of opportunity behind them — that is precisely why research on intergenerational mobility matters.

So what we must change is not simply the rate table.

It is the time axis by which we measure the economy.

Look at one year, but look at the lifetime with it;

look at one person, but look at the family and the generations with them;

look at current assets, but look at the path by which they were formed;

look at inherited assets, but look at the previous generation’s labor and risk, and at the next generation’s opportunities as well.

Taxes, too, must be able to reflect this reality.

That does not mean taxing every intergenerational transfer or redistributing every asset.

The opposite.

It is precisely to distinguish what is legitimate accumulation and what is excessive entrenchment of opportunity that we must look at the process.

Process is needed so that assets accumulated through a lifetime of labor and assets overwhelmingly concentrated across generations are not interpreted the same way.

Process is needed to distinguish the economic reality of a person whose current income is low while carrying the risks of their parents’ generation, from a person whose current income is low but who receives ample family support.

And process is needed so that the lifetime of saving and sacrifice parents made for their children is not erased into the single number of current assets.

The amount is the outcome.

The process shows how that outcome was made.

An accurate tax system must not judge outcomes alone.

It must understand the process by which the outcome was made.

And it must see how that process changes the opportunities of the next generation.

Therefore the social accounting of the future must look at no less than three generations of time.

From the grandparents’ starting point, through the parents’ accumulation, to the current generation’s starting point.

And on to the flow of resources and risks from the current generation to the next.

Only then can we, for the first time, see economic inequality not as the simple problem of **“who has how much,”**

but as “who started from what conditions, experienced what, accumulated what, and passed what to the next generation”

— a problem of the life course.

The future of taxation does not lie in collecting more numbers.

It lies in measuring reality more accurately.

And only when we measure reality more accurately can we judge,

on whom more tax should fall,

who needs tax support,

which asset transfers should be protected,

which intergenerational concentrations should be softened,

and how to open opportunity for the next generation

— with far more precision.

What we must change is not simply the tax rate.

It is the way we look at a person’s present.

A person’s present exists not on one year but on generational time.

And a fair tax system must be able to see that time.

Three-Generation Life Account

The Three-Generation Life Account: a new research frame for measuring intergenerational asset formation and inequality of opportunity

1. The Starting Point of the Research

Existing inequality research has measured income, assets, consumption, education, and labor-market outcomes separately. Intergenerational mobility research has analyzed the relationship between parents’ socioeconomic status and children’s economic outcomes, and the World Bank has built data on intergenerational income mobility for 87 economies as of 2025.

But an individual’s current economic position can be the cumulative result of the previous generations’ resource transfers, educational investment, housing support, inter-vivos gifts, inheritance, debt burdens, and asset-price changes.

This research therefore proposes, beyond the static economic state of the individual, the **dynamic intergenerational economic trajectory across three generations** as the unit of analysis.

2. Core Concept

Three-Generation Life Account

For a household or individual i, connect the following three generations.

[

G_{-1} \rightarrow G_0 \rightarrow G_{+1}

]

where

- G_{-1}: the parent generation

- G_0: the generation under analysis

- G_{+1}: the child generation

For each generation, construct the following variables.

[

X_g =

(Y_g, W_g, D_g, E_g, H_g, T_g, I_g, R_g)

]

where

- Y: lifetime income

- W: net worth

- D: debt

- E: educational resources

- H: housing resources

- T: intergenerational transfers

- I: inheritance and gifts

- R: risk exposure and shocks

3. Core Hypotheses

H1. Current assets are an incomplete measure of the intergenerational economic process.

Inequality measured by current net worth alone and inequality accounting for lifetime and intergenerational transfers will differ significantly.

H2. Intergenerational transfers explain a substantial share of current assets.

Including not only inheritance but inter-vivos gifts, housing support, and educational spending will further strengthen the association between the economic positions of parents and children.

In research reviewed by the OECD as well, inheritance and gifts appear as important factors explaining the parent–child correlation of wealth.

H3. Parents’ ‘capacity to support’ matters more for a child’s starting point than parents’ assets.

Even among households with identical parental assets, the resources actually transferred to children can differ.

H4. Inter-vivos transfers may affect a child’s early life more than inheritance.

Inheritance generally occurs late in life, while support for education, housing, entrepreneurship, and marriage can occur at the time of labor-market entry and the beginning of asset accumulation.

H5. Economic discontent relates not only to absolute gaps but to perceived fairness of process.

To test this empirically, we combine measures of economic discontent, tax preferences, perceived social mobility, and receipt of parental support.

4. Core Indicators of the Three-Generation Life Account

4.1 Intergenerational Transfer Exposure

Measures the present value of the transfer resources an individual received from the parent generation over their lifetime.

[

ITE_i = \sum_{t=1}^{T}

\frac{Transfer_{it}}{(1+r)^t}

]

This includes

- cash gifts

- housing support

- education costs

- living costs

- startup capital

- debt-repayment support

- inheritance

— and so on.

However, this does not mean forcibly converting every act of help within families into tax records; it is measured step by step through research-purpose sample surveys combined with administrative data.

5. Three-Generation Wealth Mobility Index

Intergenerational asset movement can be defined as follows.

[

TGMI =

1-\rho(W_{G_{-1}},W_{G_0},W_{G_{+1}})

]

Here \rho denotes the correlation structure of asset positions across generations.

The higher the value, the more independent asset positions are across generations; the lower the value, the more persistently the parent generation’s asset position is reproduced in the children’s and grandchildren’s generations.

In actual research, however, quantile mobility, rank-rank slopes, IGE, and transition matrices must be used together instead of a simple correlation coefficient.

Given that the World Bank’s GDIM systematically measures intergenerational income mobility, this research can be designed as an extension of existing mobility research into the dimensions of assets, transfers, and three generations.

6. Research Data

In Korea, what matters most is combining administrative data with panel data.

Possible sources are as follows.

Stage 1

The Survey of Household Finances and Living Conditions

Stage 2

The Korean Labor and Income Panel Study

Stage 3

The Korea Welfare Panel Study

Stage 4

Administrative data on population, housing, and income

Stage 5

Administrative data on inheritance and gifts

Stage 6

Education, housing, and financial data

The key is not to connect these indiscriminately in personally identifiable ways, but to build research datasets through a secure pseudonymized-data combination system for statistical and research purposes.

7. The Most Important Empirical Model

Base model:

[

Y_{child}

\alpha

+

\beta_1 Y_{parent}

+

\beta_2 W_{parent}

+

\beta_3 Transfer_{parent\rightarrow child}

+

\gamma X

+

\epsilon

]

Extended model:

[

W_{child}

\alpha

+

\beta_1 W_{grandparent}

+

\beta_2 W_{parent}

+

\beta_3 Transfer

+

\beta_4 Education

+

\beta_5 Housing

+

\beta_6 Debt

+

\gamma X

+

\epsilon

]

Through this we analyze not simply “are children of rich parents rich?”, but

through what paths parental wealth is converted into the child’s economic position

— that is the object of analysis.

8. The Most Important Identification Problem

This is very difficult research.

Between the fact that parents are wealthy and the fact that a child succeeded, education, ability, region, schools, health, labor markets, and cultural capital all operate at once.

So one cannot conclude from simple correlation alone that “inequality arose because of inheritance.”

The methods needed are as follows.

- sibling fixed effects

- cohort analysis

- event study

- inheritance timing

- instrumental variables

- regression discontinuity

- natural experiments

- administrative longitudinal data

In particular, an event-study linking the timing of inheritance with children’s asset and labor-market outcomes can be an important research design.

9. Policy Experiments

The final stage of the research is tax-model simulation.

Existing model:

[

Tax = f(Current\ Transfer)

]

Reform model:

[

Tax =

f(

Lifetime\ Transfers,

Previous\ Inheritance,

Current\ Wealth,

Recipient\ Circumstances

)

]

Apply both systems to the same household data and compare.

The evaluation indicators are

1. tax revenue

2. the post-tax Gini coefficient

3. wealth inequality

4. intergenerational mobility

5. labor supply

6. saving

7. entrepreneurship

8. residential mobility

9. tax avoidance

10. administrative cost

— these ten.

10. The Ultimate Question of the Research

In the end, what this research asks is not what percentage the inheritance tax rate should be.

The real question is this.

«Which tax system most effectively lowers the degree to which parents’ economic background determines a child’s economic fate, without excessively distorting labor, saving, investment, family care, and business succession?»

Centered on this question, this research can connect tax studies, economics, social mobility research, demography, labor economics, and housing economics.

And exactly at this point, the Three-Generation Life Account becomes a new research program.

A Tax Reform Proposal for Korea Based on the Three-Generation Life Account

— Beyond inheritance-tax revision, toward a ‘lifetime asset-transfer tax system’

I. Goals of the Reform

Redefine the goals of Korea’s tax reform as the following four.

1. Protect normal family support.

2. Manage massive intergenerational concentrations of wealth.

3. Distinguish assets formed through labor, saving, and entrepreneurship from repeated gratuitous transfers.

4. Raise post-tax intergenerational mobility.

So the goal is not “collecting as much inheritance tax as possible.”

The objective function is as follows.

[

Maximize;

Intergenerational\ Mobility

+

Equality\ of\ Opportunity

+

Economic\ Efficiency

]

subject to

[

Revenue \geq Required\ Fiscal\ Floor

]

and

[

Administrative\ Cost \leq Acceptable\ Level

]

II. Reform 1 — Gradually Convert the Inheritance Tax into a ‘Recipient-Based Lifetime Transfer Tax’

The current inheritance tax is structured to tax the deceased’s entire estate.

The OECD assesses that if equality of opportunity is the main goal, recipient-based taxation — based on what each recipient actually received rather than the whole estate — can be more suitable. In particular, accumulating gifts and inheritances received over a lifetime can create a more consistent tax burden on the same total transfer even when it is split into multiple transfers.

Korea therefore pursues the following phased transition.

Stage 1

Build an integrated reporting system for inheritance and gifts.

Stage 2

Introduce individual Lifetime Transfer Accounts.

Stage 3

Tax inheritance and gifts on the basis of each individual’s cumulative lifetime receipts.

Stage 4

Gradually convert the existing inheritance tax into a recipient-based system.

III. Reform 2 — The Lifetime Cumulative Transfer Account

Suppose individual A receives from their parents

- 100 million won at 30

- 200 million won at 35

- 300 million won at 40

- 500 million won at 55

- 1 billion won at 60

— suppose they received these.

The current system carries the complexity of treating each gift or inheritance event as a separate taxable event.

In the new system, the state records for each individual

[

Lifetime\ Transfer

\sum Gifts + \sum Inheritances

]

— this record.

This is the lifetime asset-transfer account.

IV. Reform 3 — Create a ‘Basic Family Support Band’

Not everything a family does to support its children should be taxed.

On the contrary, normal intergenerational support performs a socially necessary function.

So a certain band of each individual’s lifetime cumulative transfers is tax-exempt.

For example, as a policy design draft:

lifetime cumulative receipts

- 0–500 million won: 0%

- 500 million–1 billion won: 10%

- 1–3 billion won: 20%

- 3–10 billion won: 30%

- over 10 billion won: 40%

— a structure like this can be examined.

Caution: these are not current statutory rates but illustrative figures for the policy simulations this research proposes.

Before actual legislation, the rates must be determined by modeling revenue effects, distributional effects, and avoidance behavior.

V. Why Neither Unconditionally Keep Nor Unconditionally Abolish the Existing 50% Top Rate

Korea’s inheritance and gift tax currently tops out at 50%.

But as the OECD points out, the fairness of a system cannot be judged by the rate alone.

The effective burden differs with the breadth of the tax base, deductions, asset-specific preferences, inter-vivos gifts, valuation rules, and business-succession provisions. The OECD notes that in many countries broad exemptions and preferences can lower the effectiveness and progressivity of inheritance taxes.

So the core is not

«high rates + a narrow base»

but

«a broad, transparent base + reasonable progressive rates»

— that is the core.

VI. Reform 4 — Capture ‘Inter-Vivos Transfers’ More Accurately than ‘Inheritance’

This is the most important reform.

Assuming that wealth transfers occur only at death misses reality.

Consider a child who receives 500 million won from their parents at 25 to buy a house, and after the house price rises, inherits another 1 billion won at 60.

Economically, 500 million won at 25 is an enormous starting point.

So the new system integrates inter-vivos gifts and inheritance into a single lifetime transfer account.

The OECD likewise assesses lifetime transfer taxation that considers gifts and inheritances together as advantageous for taxing multiple transfers consistently.

VII. Reform 5 — Distinguish the ‘Economic Kinds’ of Parental Support

Not all support should be treated identically.

Classify as follows.

A. Subsistence and education support

Education costs, medical costs, basic living costs, and the like.

→ Protected within a certain range.

B. Housing support

Jeonse deposits and home-purchase support.

→ Protected up to a certain amount, but large asset transfers are included in the cumulative account.

C. Entrepreneurship and productive investment

Startup capital, business investment.

→ Tax deferral or reduced rates under certain conditions.

D. Pure asset transfers

Large gratuitous transfers of cash, stock, real estate, and the like.

→ The core taxable object of the lifetime cumulative transfer tax.

Only this way can we avoid the error of treating “parents paying a child’s tuition” and “transferring tens of billions of won across generations” as the same act.

VIII. Reform 6 — Protect Business Succession on a Separate Track

The problem of business succession must be separated from ordinary inheritance.

The OECD also sees the effect of inheritance taxation on family-business succession as a distinct design problem. At the same time it points out that taxing too lightly can create the problem of shifting capital to less suitable heirs.

So business succession allows deferred payment of tax on conditions of

- maintaining employment

- domestic investment

- long-term management

- the company’s substantive business activity

- governance transparency

— and the like.

But there must be no unlimited exemption simply for being a “family business.”

IX. Reform 7 — Reform Asset Valuation and Tax Avoidance Together

Lifetime transfer taxation does not work by changing rates alone.

It must be able to capture

- financial assets

- real estate

- unlisted shares

- trusts

- overseas assets

- indirect transfers through corporations

— all of these.

The OECD points out that the effectiveness of inheritance and gift taxes can be heavily affected by exemptions, preferences, and avoidance opportunities through inter-vivos gifts, and stresses the importance of digitized third-party reporting and stronger data linkage.

So for Korea too, raising the connectivity of tax information matters before raising rates.

X. Reform 8 — The Three-Generation Life Account Separates the ‘Tax Account’ from the ‘Statistical Account’

This is very important.

The state holding three generations of information does not mean all of it should go directly into tax calculation.

So two accounts are created.

① Tax Account

Contains only the information needed for actual tax calculation.

- gifts

- inheritance

- assets

- taxable value

- deductions

- rates

② Social Mobility Account

A statistical account for policy research.

- parental assets

- education

- housing

- debt

- transfers

- labor income

- children’s outcomes

Personally identifying information is strictly separated.

Only this way can the “Three-Generation Life Account” be kept from degenerating into a citizen-surveillance system.

XI. Reform 9 — Connect the Use of the Revenue to ‘Mobility Investment’

Here this reform goes beyond mere tax policy.

A fixed share of the revenue secured from intergenerational transfers is invested in the following areas.

1. Youth asset formation

2. Educational opportunity

3. Housing independence

4. Startup capital

5. Vocational training

6. Early-adulthood debt relief

That is,

[

Intergenerational\ Transfer\ Tax

\rightarrow

Intergenerational\ Opportunity\ Investment

]

— building this structure.

Not simply seizing wealth transfers and redistributing them,

but making one generation’s concentrated assets circulate back as capital that improves the starting point of the entire next generation.

XII. Reform 10 — Do Not Evaluate Success by Revenue

Set the reform’s KPIs as follows.

1. Intergenerational income elasticity

2. Intergenerational wealth elasticity

3. The correlation between parental background and youth assets

4. The rate of youth housing independence

5. The youth entrepreneurship rate

6. The concentration of inheritance and gifts

7. The scale of tax avoidance

8. Post-tax wealth inequality

9. Tax administration costs

10. Intergenerational mobility

Only this way does the purpose of tax reform change from “how much more was collected” to “how mobile society has become.”

XIII. The Legislative Amendment Package

Translated into actual law, at minimum the following package is needed.

The Inheritance and Gift Tax Act

1. An integrated transfer account for inheritance and gifts

2. Individual lifetime cumulative receipts

3. Recipient-based progressive taxation

4. Unified tax standards for inter-vivos gifts and inheritance

5. Redesign of preferences and deductions

The Framework Act on National Taxes

1. Secure linkage of intergenerational asset-transfer information

2. Third-party reporting systems

3. Data-protection provisions

The Statistics Act

1. Production of intergenerational mobility statistics

2. Intergenerational asset-transfer statistics

3. Construction of Three-Generation Life Account statistics

The Personal Information Protection Act

1. Pseudonymized-data combination for research purposes

2. Prohibition of use beyond stated purpose

3. Prohibition of disclosure of individual life accounts

XIV. Sequence of Implementation

Do not convert all at once.

Phase 1 — 2027–2028

Build the measurement infrastructure

- inter-vivos gift data

- inheritance data

- asset data

- income data

- housing data

- intergenerational mobility data

— linked.

At this stage, rates are not changed significantly.

Phase 2 — 2029–2030

Pilot the Lifetime Transfer Account

Calculate individual cumulative transfers while running in parallel with the existing tax system.

Through this, measure actual revenue and avoidance behavior.

Phase 3 — 2031–2033

Convert the inheritance tax into a recipient-based lifetime transfer tax

Gradually shrink the share of the existing inheritance tax while expanding lifetime transfer taxation.

Phase 4 — 2034 onward

Formalize three-generation social accounting

The state publishes annually:

«The Korea Intergenerational Mobility Report»

and

«The Korea Intergenerational Asset Transfer Report»

— released separately.

XV. The Most Important Philosophy of This Reform

This reform does not cast the rich as the enemy.

It does not treat the act of creating wealth as a problem.

It does not make it a sin for parents to give money to their children out of love.

On the contrary, it recognizes the normal transfer of resources within families.

It only asks that the state, for the first time, systematically pose these questions.

«How much economic resource has one person received from their family over a lifetime?»

And

«Across how many generations has that transfer been repeated?»

And

«As a result, how much has the next generation’s starting point changed?»

These three questions must be connected.

XVI. The Final Policy Principle

Korea’s new tax system is therefore summarized in one sentence.

«“Not taxing on the mere ground of having much wealth, but placing progressively greater social responsibility as the intergenerational transfer of assets formed within socially granted economic opportunity accumulates.”»

And conversely,

«“Assets formed through one’s own labor, saving, and innovation are respected to the greatest extent, while gratuitous transfers massive enough to determine the next generation’s starting point carry a clear social price.”»

This is a tax system that sees the amount and the process at once.

Seeing current assets, but seeing the lifetime;

seeing inheritance, but seeing inter-vivos gifts;

seeing one person, but seeing parents and children together;

collecting taxes, but measuring how those taxes change the opportunities of the next generation.

In the end, Korea’s tax reform must move

from the question “who has how much?”

— from that question —

to “through what paths is wealth accumulated, how does it move across generations, and how does that process change the opportunities of the next generation?”

— to that question.