The $500 credit offered by the Legault government to 6.4 million Quebecers should probably have been more targeted and actually risks aggravating (a little) the rise in the cost of living that it is supposed to mitigate, note economists. But it was also the “least bad” solution proposed, and the government could hardly have stood idly by.
“As a former senior finance official, I would tell you that there are certain things that are inevitable in life, explained in a telephone interview to the Homework, Wednesday, the chairman of the Public Policy Committee of the Association of Quebec Economists, Louis Lévesque. If you are facing an inflationary surge, the government has no immediate financial problem and it is in a context that makes it more sensitive to public opinion, there will inevitably be a question of financial compensation to citizens. , at least occasionally. »
The main factors behind the sharp rise in inflation for less than a year—such as disruptions in supply chains, global energy prices or central bank monetary policy—do not depend on the governments, and even less that of Quebec, recalls the former Liberal minister under Jean Charest and today professor at the Chair in Macroeconomics and Forecasting at the School of Management Sciences at UQAM Alain Paquet. “The options for the government were limited. He found something that was quick and easy. The fact that it could also have positive political fallout surely didn’t hurt either. »
Quebec tax policies already include mechanisms that allow inflation to be taken into account and that work rather well, observes the professor and principal researcher at the Chair in Taxation and Public Finance at the University of Sherbrooke, Luc Godbout. Each year, the tax table, the solidarity tax credit or the family allowance are adjusted according to the cost of living, but with a time lag. This lag would have hurt this year, given how quickly prices have climbed since the indexing metrics were last calculated this fall, and it demanded an immediate lump-sum adjustment.
Based on a basket of goods and services of $22,000 corresponding to “a basic standard of living”, the Legault government estimated the shortfall at $432, which it rounded to $500 and promised Tuesday to the 6.4 million Quebec adults earning less than $100,000 a year.
This one-off, non-recurring payment for a total amount of 3.2 billion should make it possible to offset around half of the effect of this “unusually high inflation”, which should amount to 4.7% on average this year, Laurentian Bank Chief Economist Sébastien Lavoie said on Wednesday.
We could have done better
” That’s a lot of money. One might wonder whether it would not have been appropriate to lower the income ceiling for eligible taxpayers and better target the households that really need it,” says Alain Paquet.
Louis Lévesque quite agrees. “I doubt that people who earn $90,000 a year expected to receive compensation from the government. »
“This measure has the advantage of being simple and ensuring that money is sent quickly to people who need it,” notes Luc Godbout. “A more targeted approach based on household characteristics would probably have required more time. »
The expert does not believe that we can go so far as to speak of a regressive measure, especially if we also take into account the “exceptional benefit for the cost of living” announced this fall for the 3.3 million people with lower incomes, which was $275 for single people and $400 for couples. “As a proportion of household income and expenditure, the total compensation offered has been greater at the bottom than at the top. »
Is sending $3.2 billion into the pockets of Quebec taxpayers not likely, ironically, to support their consumption and contribute to inflationary pressures? “It’s certain,” says Louis Lévesque. Especially since we can bet on the fact that Quebec’s example will be followed by other governments. »
When we compare…
When we look at all the proposals that had been made by each and every one in view of the budget, the solution adopted by the Minister of Finance, Eric Girard, nevertheless appears to be the best in the eyes of the experts consulted. “A reduction in the QST or gasoline taxes, for example, would have been a bad idea, because it was important to have a temporary measure and it would have been even more poorly targeted,” argues Alain Package.
“Obviously it’s not ideal. But when you look at all the proposals that were on the table, and you take into account the fact that we were looking for something quick and punctual… Let’s say that it was probably the least bad way to do it” , says Luc Godbout.
Louis Lévesque generally shares this opinion. But by dint of being questioned on the subject, he ends up confiding. “All of this could have cost less and been better targeted, but it can be fine. But, as an economist who has worked on public finance issues for a long time, I admit, it is not necessarily the thing in the budget that worries me the most. I must say that what fascinates me is all this attention paid to short-term issues, whereas I am above all inclined to look for the vision and strategies that could help us overcome our structural challenges longer term, such as health and productivity. »