CAQ's promised tax cuts disadvantage those with lower incomes, says research group

The less affluent are disadvantaged by the Legault government's promised tax cuts, according to a report from the Institut de recherche et d'informations socioéconomiques (IRIS), which recommends instead allocating this money to public services.

The promised cut would save $814 for taxpayers earning more than $100,000 a year, according to the left-wing think tank. 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," said 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.

Hébert agrees with the idea of reviewing the payments to the Generations Fund, which he compares to "a straitjacket" that "hides" budget surpluses to limit government spending, he said.

According to IRIS, the money allocated to tax cuts should instead be used to finance public services like education and health.

Hébert cites staffing issues in the health network, the needs in the home services sector for seniors, and the lack of daycare spots.

"Public services are already in bad shape," he said.

"Labour scarcity is often scarcity at the price employers would want to pay," he added.

"When you value jobs enough, when you have workplaces that are attractive, that don't cause a completely exaggerated percentage of staff to burn out, you are able to get people and retain [public sector employees]."

TAX CUT: MIXED REACTIONS 

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, expected to be adopted on March 21.

For various 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 public debt.

But tax relief also has its advocates: the Canadian Federation of Independent Business (CFIB) publicly urged 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, CFIB's Quebec vice president, in an interview. "That we remain the most taxed is not necessarily the best thing."

MORE TAXED THAN 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 Montreal's trade board in December.

But comparing taxes with other provinces doesn't provide the whole picture, says Hébert.

"You have to be careful before you say that Quebecers are the most taxed in North America."

Each household's situation will impact its effective tax rate when transfers to families are considered, 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 report by The Canadian Press was first published in French on March 15, 2023.