The Quebec budget to be tabled on March 21 should contain the tax cuts promised by the Legault government during the election campaign. In the consultations he conducts each year before preparing his budget, the Minister of Finance of Quebec has heard an astonishing number of voices demanding that Quebecers’ taxes not be reduced this year.
Even the Conseil du patronat du Québec (CPQ) does not mention reducing the tax burden of Quebecers this year in its memorandum to the Minister of Finance. He even thinks it’s not a good idea.
“It’s true that it’s amazing,” agrees with a laugh Norma Kozhaya, vice-president for research and chief economist of the employers’ organization.
The CPQ is not against tax cuts, as you can imagine. “It’s the whole context that makes it not the best idea right now,” says the economist.
“If we had a balanced budget and if we had surpluses, we could think of allocating them to tax cuts, but that is not the case. »
The government has planned to finance its future tax cuts, the cost of which is estimated at around $2 billion per year, by drawing on the Generations Fund.
The CPQ is of the opinion that financing tax cuts from a fund set up to ensure generational equity is not a good idea either, an opinion expressed many times in the pre-budget consultations.
The Institut du Québec is another organization that has reservations about the government’s intention to use the Generations Fund to finance tax cuts. In addition to increasing the mortgage for future generations, it compromises the objective of reducing Quebec’s debt to a level comparable to that of other Canadian provinces, argues the team of the Institut du Québec under the direction of Luc Belzile.
But inflation?
A reduction in the tax burden of Quebecers, the heaviest in Canada, could be justified by inflation and the rise in the cost of living, which is clipping the wings of taxpayers. However, the Quebec government has already done a lot to reduce the impact of inflation on Quebec families. In 2022, many support measures have been added to the Quebec social safety net, including two cash payments, one of $500 and the other varying between $400 and $600. In total, this aid intended to help Quebecers cope with inflation cost $7.5 billion and is the most generous of all the Canadian provinces, according to the Chair in Taxation at the University of Sherbrooke.
PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESSE ARCHIVES
Finance Minister Eric Girard
Oil on the fire
The economy is slowing down and the risks of recession are increasing, but the financial situation of Quebecers remains enviable, even the Minister of Finance recognizes this. The savings rate is higher in Quebec than elsewhere in Canada, which puts Quebecers in a better position to weather the economic slowdown, underlined Minister Eric Girard in his December economic update.
For the Association of Quebec Economists, reducing taxes is like adding fuel to the fire.
The economy is overheating, the unemployment rate is at a historic low and the number of vacancies has never been higher. And we would add even more money?
Louis Lévesque, President of the Public Policy Committee of the Association of Quebec Economists
Like the Conseil du patronat, Quebec economists are of the opinion that lowering Quebecers’ taxes is desirable, but not now. This is not the right time to stimulate demand, according to Louis Lévesque.
“The biggest problem for the Quebec economy isn’t demand, it’s the labor shortage. If we want to lower taxes, we should target this problem with measures that have an impact on work income, such as an increase in deductions for workers,” he says.
PHOTO OLIVIER PONTBRIAND, LA PRESSE ARCHIVES
Health spending, which currently accounts for 50% of all state spending, should be increased by an additional billion for prevention, according to the Association for Public Health of Quebec.
More pressing needs
Rather than cutting taxes, the government would be better advised to spend that money on badly needed health care and hospitals, crumbling schools, or potholed roads. This is what many groups are calling for, observing the general deterioration of public services.
The Alliance du personnel professionnel et technique de la santé et des services sociaux, which brings together 65,000 health network employees, wants the government to completely stop its payments to the Generations Fund and redirect this money to the health network and social services.
Health spending, which currently represents 50% of all government spending, should be increased by an additional billion to make prevention, according to the Association pour la santé publique du Québec, an autonomous grouping of citizens and organizations concerned about Quebec’s lag in disease prevention.
Not reducing taxes in order to be able to spend more is a false good idea, according to economist Louis Lévesque.
First, he explains, whether the money comes from consumers’ pockets or from the public treasury, the additional spending contributes to fueling inflation.
Then, public spending has increased enormously in recent years and we find ourselves paying more for fewer services. “We spend more and the results are not up to par. There are organizational and productivity issues to be resolved,” he notes.
According to him, the elimination of the deficit should be the priority for a government which has just been re-elected for a new mandate, whose financial situation is comfortable and while the economy is overheating. “This is an opportunity to look to the future. It’s the right timing. »
A goal achieved?
Even if it is not unanimous, the prospect of a tax reduction is cause for joy for many, including the Canadian Taxpayers Federation, which hopes that its discourse will finally be heard in the next budget.
Tax cuts are necessary to give taxpayers leeway in the face of the economic slowdown, argues the grouping in its memorandum to the Minister of Finance.
By reducing the tax burden on individuals and businesses, the Québec government can achieve its two objectives: protect the purchasing power of Quebecers and support the growth of the Québec economy.
The Canadian Taxpayers Federation
A petition has been posted on the organization’s website to urge the Legault government to respect its electoral commitments and lower taxes.
“Our petition has so far received the support of 9,000 signatories and we intend to campaign until the eve of the budget so that all Quebecers in favor of a tax cut are heard,” said Nicolas Gagnon. , Quebec Director of the Canadian Taxpayers Federation.