Blessed by a favorable financial context, the Minister of Finance, Eric Girard, presented a budget that fulfills the Coalition avenir Québec’s commitment to reduce taxes while providing increased funding for the essential missions of the State, which are the education and health.
We cannot accuse the Legault government of sacrificing public services to offer the promised tax cuts since it is a reduction in the payments provided for in the Generations Fund that will finance the reduction of the tax burden. Instead of 10 years, it will take 15 years to reach a new objective: to reduce the ratio of net debt to gross domestic product (GDP) to 30%, ie to subtract 7.5 points from the current level. As the Legault government is very fond of comparisons with Ontario and the other provinces, this new percentage represents the current average in all the provinces without Quebec. It should be noted that this new target was thus promulgated without any public debate.
During the closed session, Eric Girard deplored that the Quebec middle class pays more income tax than Ontarians. In the budget documents, it is mentioned that the weight of personal income tax in relation to GDP was 14.7% in Quebec, compared to 12.7% in the other provinces on average. That’s a 15% difference.
Eric Girard argued that the tax cuts would spur economic activity as the slowdown deepens in the second and third quarters of 2023. no recession worthy of the name.
The rhetoric about family paradise—access to reduced-contribution daycare services as well as much lower university tuition fees—is no longer relevant. Not a word either on the progressive nature of income tax in Quebec, associated with the solidarity tax credit, as well as on the relationship between the cost of living and disposable income, which favor Quebecers.
The CAQ government stuck to the first installment of its election promise, with a 1% reduction in the rates of the first two tax brackets. The Minister kept a little embarrassment and did not program the decreases of 0.25% per year for the four subsequent years. Several economists have pointed to the risks of permanently reducing the government’s room for manoeuvre.
Similarly, opposition parties have rightly pointed out that tax cuts favor the highest earners in absolute terms and give nothing to those who do not pay taxes. The minister defended himself by recalling other measures already announced, including the tax credit of a maximum of $2,000 for people aged 70 and over.
This is Eric Girard’s fifth budget, and he was once again able to generate revenues that exceeded his financial framework. Thus, own-source revenue exceeded its forecasts by $6.7 billion, which enabled the government to incur new expenditures in the order of $5.5 billion since March 2022 while setting aside just over $1 billion for the initiatives announced in this budget.
True to its economic profile, the CAQ government is renewing the tax holiday for major projects, while improving it. It plans to finance, by the end of 2029, 100 projects which would total investments of 24 billion. After the failure represented by Volkswagen’s choice to set up its battery plant in Ontario, we will have to see if Quebec will have the electricity and the workforce necessary to achieve this ambition.
In education, the budget increases by 6%, which corresponds to the average growth during the first term of the CAQ government. Higher education sees its envelope thicken by 5%. For health and social services, Minister Christian Dubé will be entitled to a 7.7% increase, in particular to carry out his reform of the system. Of an addition of 5.6 billion, more than 3 billion will go to the Health Plan, in particular to the creation of front-line clinics bringing together nurse practitioners. Considering a total budget of $59 billion, the agreement with the Trudeau government on health funding, which has not yet been officially signed, counts for little: net, all categories combined, federal transfers only increase by $516 million in 2023-2024, and stagnate the following year.
Although the economy has slowed, the effects of inflation on public finances have been beneficial. In this sense, this Minister of Finance seems blessed by the gods, at least the god of money, which allows him to have the butter — that is, to adequately finance the main missions of the State — and the money for the butter — c that is to say, to grant tax cuts. However, one can wonder how much longer the gods will be favorable to him.