A “questionable” tax credit. A budgetary measure “not progressive enough”.
Posted at 3:57 p.m.
For the second time in a few days, Desjardins Group economists are criticizing the $500 tax credit announced in the Legault government’s recent budget, as an aid against inflation for all Quebec taxpayers up to 100,000 $ of annual income.
In his weekly analysis post published on Friday, the vice-president and chief economist of Desjardins Group, Jimmy Jean, indicates that “more progressive measures are preferable” to a generalized tax credit when “certain governments” want to “protect most vulnerable segments of the population” to consumer price inflation.
“An alternative to the near-universal $500 tax credit would have been to prioritize households in more precarious financial situations, such as single-parent families or low-income seniors. This was also the approach that had been taken during the update [budgétaire] last fall, when the government [Legault] had opted for an improvement in the solidarity tax credit”, indicates Jimmy Jean, who is one of the most influential economists in the financial sector in Quebec.
In support of his critique of the $500 tax credit, Jimmy Jean explains that “households with a larger discretionary spending cushion can more easily make the consumption choices needed to adjust to the rising cost of the life. »
Also, emphasizes Jimmy Jean, “let’s not lose sight of the fact that middle- and high-income households still have a large savings surplus. So they have options at their disposal and don’t need help from the government”.
Finally, Jimmy Jean questions the very economic relevance of a special tax credit to offset the impact of inflation. “Recourse to occasional assistance [comme un crédit d’impôt] seems to assume that the recent price spikes will quickly be reversed, when there is no guarantee to this effect,” indicates the Desjardins Group’s chief economist.
Earlier this week, in their budget analysis report released on Tuesday by the Minister of Finance, Éric Girard, Desjardins economists had already described as “questionable” the announcement “of a one-time amount of $500 to all adults with an annual income of up to $100,000. »
“This is a measure that is not progressive enough, while the effects of the sharp rise in prices, especially for food and housing, are felt much more intensively on lower-income households. , we read in the report of the economists of Desjardins.
“Furthermore, these households have not been able to benefit [durant la pandémie] savings and wealth gains as large as higher-income individuals. »
Therefore, according to Desjardins economists, “financial assistance focusing more on lower-income households would have been preferable” to a near-universal tax credit of $500.