Government has said it will cut taxes and spend more
The economy of the province is doing better than many people thought it would, so the Quebec government will have some room to work with when making this year’s budget, which will be released on Tuesday.
What’s the meaning of that? Some economists didn’t expect as many Quebecers to have good jobs. Finance Minister Eric Girard’s budget math depends on the fact that these people are also paying more taxes and fewer people are using social safety net programs.
This is good news for the government, which has said that its next budget will include both spending increases and tax cuts. Some economists and political analysts call this “having your cake and eating it too.”
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Economists usually tell people not to do this. People say that when the economy is doing well, governments shouldn’t necessarily cut taxes but should instead use the extra money from taxes to pay down debt. Quebec has a lot of debt, some of which is due to the expensive COVID-19 and inflation relief plans that were put in place recently.
But Tuesday’s budget is not likely to show that. As usual, the finance minister hasn’t said much about what’s in the documents. However, Girard did say that the government will keep the promises it made during last year’s election campaign. This is likely to mean more spending, not less, along with a tax cut that some people think is coming too soon.
So, here’s what to look forward to:
Lower taxe
The CAQ’s promise to cut taxes by 1% for the two lowest tax brackets has caused some controversy.
If the government keeps that promise, which Girard has said it will, a taxpayer making $55,000 a year would save $378, but people with higher incomes would save even more.
During the election, Legault said that people in Quebec who make $80,000 a year would save $630 a year in taxes.
Some economists have raised their eyebrows at the idea.
According to, nearly 35% of the people in Quebec do not make enough money to benefit from the tax break.L’Institut de recherche et d’informations socioéconomiques(IRIS).
In an interview, Guillaume Hébert, a researcher with IRIS, said, “It would be an unfair tax cut because it would mostly help people with higher incomes.”
The government said that the $2 billion plan would be paid for by cutting payments to the Generations Fund, which is a savings account for bad times.
IRIS says that money would be better spent in the public sector, such as on health care or education.
Concerns have also been raised about the timing of the tax cuts. The government is dealing with debt from COVID-19 relief measures and has promised to spend more.
“If you want to make these promises at some point, that’s fine,” said Moshe Lander, a senior lecturer in economics at Concordia University. “But you have to cut government spending somewhere else or raise taxes, not lower taxes.”
But that’s not what most people think will happen.
Increasing spendin
Francois Legault’s party, the CAQ, made a lot of expensive promises in the run-up to the 2022 election, when it won a second four-year term. These promises cost $29.6 billion.
Not all of these promises are likely to be in the budget for this year, but spending is likely to go up.
The head of the McGill Institute for the Study of Canada, Daniel Béland, said, “I think they will spend a lot more on health care, and I think education will be a top priority.” “So it sounds like the government wants to be liked, right? [Legault] doesn’t like to bring bad news.”
It’s a mix of tax cuts and spending increases, Béland said, which seems to make more sense as a political choice than as an economic one.
It would also make the budget deficit bigger, which is what happens when the government spends more on programs than it gets in taxes.
But Lander thinks that the deficit will be less than expected, maybe around $5 billion. A lower deficit than expected, on the other hand, is not something to be proud of because it is due to economic growth that the government did not cause, he said.
“When a government tries to take credit for that and says, ‘You know, the deficit is smaller,’ they don’t deserve a pat on the back,” said Lander.
Lander thinks that because the deficit is smaller, they will be able to talk about the budget in a positive way and promise to get back to a balanced budget at some point in the future.
“They’re going to do a magic trick by making the deficit smaller than expected on the way to balancing the budget while also cutting taxes and spending more.”