The tax cut promised by the CAQ disadvantages the less fortunate, according to IRIS
Posted March 15, 2023 12:24 pm.
The less affluent are disadvantaged by the tax cut promised by the Legault government, deplores a report by the Institute for Research and Socio-Economic Information (IRIS) which recommends instead to allocate this money in public services.
The promised tax cut would represent a tax saving of $814 for taxpayers earning more than $100,000 a year, the left-wing think tank said. The savings are $378 for a taxpayer making $55,000.
Nearly 35 per cent of Quebec’s population will not earn enough income to benefit from the tax break. “It would be an unfair tax cut, because it would mainly favour taxpayers with higher incomes,” deplores researcher Guillaume Hébert, in an interview.
The Legault government has promised to reduce the tax rate of the first two levels by one percentage point. The nearly $2 billion tax measure will be financed by reducing payments to the Generations Fund.
Mr. Hébert agrees with the idea of reviewing the payments to the Generations Fund, which he compares to “a straitjacket” that “hides” budget surpluses in order to limit government spending, he said.
The money allocated to tax cuts should instead be used to finance public services such as education and health, according to IRIS. His researcher gives as examples the lack of staff in health institutions, the needs in the home services sector for seniors or the lack of places in early childhood centers (CPE). “Public services are already in bad shape.”
In a context of labor scarcity, the researcher does not think that this additional spending would represent a shot in the arm.
“Labor scarcity is often scarcity at the price employers would want to pay,” he said.
“When you value jobs enough, when you have workplaces that are attractive, that doesn’t cause a completely exaggerated percentage of staff to burn out, you are able to get people and retain them [public sector employees],” he adds.
A criticized promise
The promised tax cut is not unanimously supported and its critics have made several public appearances in the run-up to the next provincial budget, which is expected to be adopted on March 21.
For sometimes different reasons, economists, civil society groups and unions have called on Finance Minister Eric Girard to abandon the election promise of the Coalition Avenir Québec (CAQ). Some argue for additional investment in public services, while others would like to see continued payments to the Generations Fund to continue reducing the public debt.
Tax relief also has its advocates. The Canadian Federation of Independent Business (CFIB) had come out publicly to urge the government to keep its election promise. We talk about intergenerational equity, but ensuring a more advantageous tax burden for young people is also intergenerational equity,” said François Vincent, Vice-President for Quebec, in an interview. That we remain the most taxed is not necessarily the best thing.”
More taxed than in Ontario?
Girard had defended the planned tax cut, pointing out that the Quebec middle class was more taxed than in Ontario. “It’s not someone who earns $300,000 who pays more tax than in Ontario, all things considered. It’s at $70,000 of income that you pay 36 per cent more tax in Quebec than in Ontario,” he said at a conference before the Board of Trade of Metropolitan Montreal in December.
Comparing taxes with those of other provinces does not give the whole picture, says Mr. Hébert. “You have to be careful before saying that Quebecers are the most taxed in North America.”
Each household’s situation will have an impact on its effective tax rate when transfers to families are taken into account, for example.
“You have to look at different types of households to see how their tax rate changes. You also have to look at the benefits that people receive, especially families.
“We see that for a single mother or a family with average incomes with two children, the tax rate drops dramatically and puts Quebec among the places where it’s most advantageous, where taxes are the least burdensome.”
-This Canadian Press article was translated from French
