Due to the ongoing economic crisis, concerns for the widening income gap continue to grow in spite of the recent efforts made by Korean government to overcome economic polarization. Unlike the classic theory by Kuznets on growth and inequality, the income inequality has been steadily increasing since the foreign currency crisis of mid-1990s hit Korean economy. It turns out that the social expenditure has been indeed effective in reducing the income inequality between 1995~2008. However, it has not been quite enough to turn around the worsening trend of income inequality. Along with the strong desire for redistribution amongst Korean people evidenced in recent opinion polls, this may put further pressure on the ever increasing fiscal burden. In order to reduce income inequality while maintaining fiscal sustainability, therefore, one may need to readjust current allocation of government budget so that a room for accommodating the expected increase in social expenditure would be created.