Rightly, the Legault government has lent itself to criticism with its $500 rebates, then its $400 checks to taxpayers who earn up to $100,000. Some people protested against this measure, which they considered highly touted and electoralist last spring and at the time of the launch of the electoral campaign. Why grant these amounts to Quebecers who do not really need them instead of favoring above all the less well-off who themselves are hard hit by the high inflation that hits the grocery basket first and foremost?
To this, the Minister of Finance, Eric Girard, had replied that in his economic update of November 2021, he had provided for an exceptional benefit of 700 million for 3.3 million people with low and middle incomes. It was still quite a bit less than the 3 billion that was cheerfully distributed to all those who earn $100,000 or less, whether they are at the top or at the very bottom of this scale.
Thanks to the latest economic and financial update, unveiled on Thursday, the Legault government is catching up in a way with the refundable tax credit intended for people aged 70 or over. It will be easy to understand that people of this age depend, for the most part, on fixed incomes that the outbreak of inflation has undermined. They are among the Quebecers who are the most affected by the rise in the cost of living.
This tax credit of a maximum of $2,000 is degressive, to ensure that seniors receive roughly the same amount up to a family income of $60,000 if they live as a couple. For single people, the tax credit goes from the current level of $411 to $2,000 for an annual income of $20,000. A couple aged 70 or over with an income of $39,350 or less will be entitled to the maximum of $4,000. The tax credit will decrease until it disappears for a couple with an income of $120,000.
Nearly 400,000 more people will have access to this tax assistance, for a total of 1.1 million people. This is a measure that costs 1.5 billion this year and a total of 8 billion in five years. It will be important. And unlike one-time checks, it’s a recurring disbursement.
The rise in inflation once again boosted the government’s own-source revenue, ie $14 billion for the five years of the financial framework. The government returns 13 billion to the population, we learned on Thursday.
With his update, Minister Girard has set the table for a marked slowdown in the economy in 2023, or even a recession (small, all the same). For the first time, the Ministry of Finance is presenting two scenarios, like the federal government.
As is usual with the minister, the deficit — at 4.78 billion after the use of the stabilization reserve — is lower than expected. The net debt to GDP ratio will continue to decline based on the baseline scenario. The alternative recession scenario projects an increase in this ratio in 2023-2024, but a reduction thereafter.
Neither the forecast slowdown nor the forecast recession will have a serious effect on the unemployment rate. Currently, the number of vacancies exceeds the number of unemployed. Before laying off workers, companies should first cut the positions they are looking to fill. The lack of manpower will act as a buffer.
Remember that the Coalition avenir Québec has promised to reduce the first two tax brackets by 1% in the next budget. Without wanting to formally confirm that its next budget will go ahead with this tax relief – but a promise is a promise, isn’t it? — , Eric Girard sees it as a good way to stimulate the economy, which will slow down next year. Just like an increase in investments in public infrastructure, investments that are already at record levels.
For those who fear that the Legault government will be reduced to making cuts in the expenditure of the major missions of the State to pay for this tax cut, Eric Girard affirms that there is no question of it. It recalls that it will be financed by a reduction in payments to the Generations Fund. The objectives of this fund (and of the law which governs it) are in any case to be reviewed, insofar as they have been achieved or are in the process of being achieved.
Even if the outlook is darkening and uncertainties are hovering, there is something reassuring about the portrait of Québec’s public finances and its economic situation. It seems that this is the signature of Eric Girard.
In short, everything is for the best in the best of all possible worlds. Until proven otherwise.