The Legault government is pushing ahead with the tax cut promised to Quebecers during the election campaign despite economic uncertainty. If the 4.6 million taxpayers benefit, the richest will have more in their pockets.
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Citizens earning $30,000 per year will benefit from a $108 reduction in their tax burden. A total that will reach $814 for the wealthiest with annual incomes of $100,000 or more.
This reduction in the first two tax rates by one percentage point applies retrospectively to January 1st. In concrete terms, however, it will only be felt in the number of employees in July, the date on which the withholding deductions will be adjusted. The self-employed can now use it.
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This measure, which will cost 1.7 billion dollars annually, will be financed from debt repayments. In fact, payments to the Generations Fund, that fund designed to reduce the weight of debt, will fall drastically by 40% this year. A justified decision, according to Treasury Secretary Eric Girard.
“I think we found the right compromise, if we hadn’t had tax cuts we would have reduced net debt by 7.5% over 10 years and that’s what we will do over 15 years, but if there are benefits, we will.” reduce the tax burden on Quebecers, which is the highest in North America!” he pleaded.
In addition, the major financier of the Legault government does not rule out a further reduction in the tax burden on Quebecers when the clouds clear and a recovery begins.
“We did it in the first term, we’re doing it here, and if we get back to a balanced budget more quickly, there might be an opportunity to do it again,” he told reporters.
$128 at checkout
For the opposition, this tax increase, which tends to benefit the privileged, is “irresponsible”.
“It’s not normal for the government to give $128 to the cashier and $814 to the CEO of grocery chains,” said Solidarity MP Haroun Bouazzi. The boat sinks and the CAQ gives gifts to the first classes, pitches swim up to the middle class and let the others sink.
According to Sébastien Lavoie, chief economist at financial group Laurentian Bank, this measure will in part help keep inflation high. “To the extent that people with above-average incomes benefit from the tax cut and therefore spend more on goods and services of all kinds,” he says.
recession risks
And despite global economic uncertainty, the Legault administration’s big financier is optimistic. “No recession is expected in Quebec,” the budget documents say.
Nevertheless, two alternative scenarios are planned: one that predicts a recession and another that predicts stronger growth. Only 15 pages at the very end of the household module are dedicated to them.
Did Eric Girard wear rose-tinted glasses? The finance minister had to admit that the recent instability in the financial markets could be a turning point.
“Ten days ago I would have told you that the upside scenario is the most likely because all the data we had for Q1 was a bit stronger than expected. There has been volatility in financial markets for the past 10 days, making the downside scenario slightly more likely than the upside scenario,” he agreed.
Still, the five-year “contingency” provision of $6.5 billion would allow the country to mitigate the impact of a worse-than-expected economic slowdown, the politician asserts.
Economist Sébastien Lavoie estimates that this cushion could be sufficient, but only if the recession is moderate. “You have to admit that the wind isn’t blowing in the right direction,” he says.
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