This text is part of the special section Personal Finances
The Quebec tax authorities clearly love children. The province’s tax system stands out from the rest of Canada for its generosity towards single-parent families and low-income households, provided they have children. The province even ranks at the top of the list of major industrialized economies in the world for its support for less affluent families.
Two-thirds (66.5%) of Quebec taxpayers declared an annual income of less than $50,000 in 2019, indicates the 2023 assessment of taxation in Québec, produced by the Research Chair in Taxation and Public Finance at the University of Sherbrooke. This is $20,000 less than the average income, estimated at $70,128 for 2021. If this amount seems low, these taxpayers nevertheless benefit from advantageous taxation, in particular if they have children.
A single person with two children and an annual salary of $47,000, for example, will end the year with $54,000 in his pocket, once he has received the government transfers to which he is entitled and the return of his tax deductions to the source. For a family in this situation, Quebec looks like a real promised land. “It is here that the net tax burden* of these families is the lowest in Canada,” says Tommy Gagné-Dubé, member of the Chair and assistant professor in the Department of Taxation at the School of Management of the Université de Sherbrooke. “The province ranks 2e among the 31 OECD economies”, adds the researcher.
The Quebec tax authorities show the same concern for couples with children, whose salary does not exceed the provincial average. Their tax burden represents 8.2% of their income. “It is also the lowest cost in Canada,” points out Luc Godbout, holder of the Chair in Taxation and Public Finance. It is also one of the weakest among OECD economies. Quebec ranks 6e rank, just behind New Zealand and Switzerland.
A doubly progressive diet
The relative generosity of the Québec tax system ends more or less there for individuals. Among single people, couples without children or whose salary reaches and exceeds the average, Quebec is a little more austere. “When the income improves, the tax levied increases quickly”, points out Luc Godbout. A couple with two children, whose salary is $140,000 (twice the average salary), for example, sees their tax burden reach 26.4% of their income. This is the heaviest burden in Canada, after Newfoundland, and one of the largest efforts among OECD economies. By way of comparison, the tax burden of the same couple reaches 15.2% in the United States.
“If there is one thing that characterizes the Quebec tax system, it is its progressiveness,” explains Luc Godbout. “Quebec has chosen to offer more targeted, less universal family support programs,” he continues. “When an individual’s salary increases, he ends up with higher tax rates, but he also loses the state assistance that he enjoyed. The two factors taken together accentuate the progressive nature of our taxation. »
Tax cuts?
The two university researchers believe that certain conditions must be met before considering the tax cuts planned by the government of François Legault. “We must first make sure we have the means to afford them,” believes Luc Godbout. “The Balanced Budget Act must be applied and long-term targets for the province’s debt must be established”, illustrates the holder of the Chair.
Luc Godbout also thinks that there would be a way to do better than the 1% drop in the tax rate for the first two levels of the tax table, as proposed by the government. “The tax differences with Ontario relate to salaries between $20 and $80,000,” explains the professor, who specifies that this difference represents 7.5 cents per dollar earned in this bracket of remuneration. “If the government wants to have an impact, this is where it needs to act,” he says. “What we are proposing is to keep the percentage point of reduction on the first rate, but to reduce by 1.8 points that between the start of the second rate of the scale up to $80,000. »
The academic sees an additional advantage to this proposal, in a context of labor scarcity. “It would have an impact on the incentive to work, since we would reduce the tax rate where it hurts the most,” he said.
* The net tax burden corresponds to the sum of income tax and social contributions paid by a taxpayer, less the government transfers from which he received during the year. The amount obtained is put in proportion to the declared income and expressed as a percentage. In Quebec, payroll taxes correspond to contributions to employment insurance, the Quebec parental insurance plan (QPIP) and the Régie des rentes du Québec (RRQ).
This special content was produced by the Special Publications team of the Duty, pertaining to marketing. The drafting of Duty did not take part.