Since coming to power in October 2018, the government of François Legault has adopted two tax measures that benefit taxpayers earning more than $100,000 per year.
First, in 2020, there was the drop in the school tax rate, which is based on the municipal assessment of properties. As the well-to-do own a much more affluent property than middle-income people, it was obvious that the richest would inevitably benefit from the largest school tax reductions.
This reduction in the school tax bill is all the more worth its weight in gold since it is a recurring tax measure that will continue year after year.
Representing a drop in school taxes on the order of $800 million per year, the entry into force of the low single school tax rate is one of the most regressive fiscal measures to have been adopted by the Government of Quebec. The decline is all the more regressive since there are 40% of tenants in Quebec, who have very little chance of benefiting from it.
When the announcement in December 2018 of the tabling of Bill 3 aimed at reducing the school tax bill, the Bureau d’Enquête du Log calculated that François Legault would save $3,305 per year on his school tax bill.
Its Minister Delegate for Health, Doctor Lionel Carmant, was going to save $2,431 a year. Next came Economy Minister Pierre Fitzgibbon, whose annual school tax bill would drop by $2,159.
Eric Girard, the Minister of Finance and also sponsor of Bill 3 (An Act to establish a single school tax rate), would benefit from a school tax reduction of $2,000 a year.
I wrote at the time that the drop in the Prime Minister’s school tax bill of $3,305 was 10 times greater than the average drop ($314) that owners of a $270,000 residence would get.
Wealthy owners of vast residential estates and luxurious residences would save more than $100,000 in school taxes per year.
To be fair, the Legault government would have had to cap the gift of lower school taxes.
The most recent tax cut
The second measure benefiting taxpayers earning $100,000 or more is, of course, the tax cut just announced by the Minister of Finance, Eric Girard, as part of his 2023-2024 budget. The government is reducing the first two tax brackets by 1 percentage point: the first bracket going up to $49,275 sees its rate drop to 14% and the second going from $49,276 to $98,540 drops to a rate of 19%.
True to François Legault’s election promise, the Minister of Finance allows those with $100,000 or more to benefit from an annual recurring tax cut of $814 per head of well-off.
More specifically, the 508,857 taxpayers earning more than $98,540, or 7.4% of all taxpayers, will share in a tax reduction of $407 million, or 25% of the total reduction of $1.65 billion. which will be granted during the next fiscal year 2023-2024.
Meanwhile, the 2.22 million taxpayers at $49,275 or less, or nearly half (48.6%) of all taxable taxpayers, will share barely 21% of said tax cut. , or 347.6 million, which is equivalent to $156 per capita of low- and modest-income taxpayers.
From an income of $50,000, the taxpayer will benefit from a reduction of $320. And for each additional slice of income of $10,000, Quebec adds $100 in tax reduction, to finally cap the reduction at $814 starting at $100,000.
For their part, the 2.3 million non-taxable taxpayers will receive absolutely nothing since they pay no tax!
Tax benefits
Taxpayers with income of $100,000 or more benefit greatly from certain tax measures.
Consider the preferential tax treatment given to capital gains realized on the sale of assets such as stocks, mutual fund units, secondary properties, etc. Only half of capital gains are taxable, while our salaries are fully taxable.
The Government of Quebec estimates the tax savings that taxpayers will realize in 2022 at $2.16 billion thanks to this preferential tax treatment granted to capital gains.
Who will benefit from it? Based on the most recent tax statistics (2019), some 80% (i.e. $1.73 billion) of said tax savings will go into the pockets of the $100,000 and more since they are the ones who monopolize 80% capital gains.
Regarding the dividend tax credit, you should know that 70% of the $373 million granted in 2022, or $261 million, will go into the pockets of $100,000 or more.
In terms of the deduction granted for financial expenses and interest expenses in order to earn investment income, 63% of the $263 million (or $166 million) of said deduction is also intended for the wealthiest.
You will also not be surprised to learn that 95% of the $89 million in deductions granted on the purchase of flow-through shares ends up in the assets.
Another tax advantage well exploited by our “rich”: the deduction for RRSP contributions. Example: according to the 2019 tax statistics (the most recent publication), almost half of the total deductions granted (48.6%) were attributed to 384,200 taxpayers of $100,000 or more, or 5.6% of all Quebec taxpayers. Tax savings realized by these pledged assets: $1 billion for deductions and $1.95 billion for the non-taxation of RRSP investment income.
Note that these tax benefits (with a few variations) enjoyed by taxpayers of $100,000 or more are also offered by the federal government.
Yes ! people earning $100,000 or more pay a lot of tax. But let’s agree that they still have the chance to substantially reduce their tax bill.