Explosion of income and tax cuts

Explosion of income and tax cuts

The treasury is overflowing thanks to inflation, which has boosted Quebec’s revenues. As the election campaign approaches, the CAQ takes the opportunity to promise a tax cut that will affect individuals in a future mandate.

• Also read: A recession is not the most likely scenario, says Girard

It was a “remarkable year,” said Treasury Secretary Eric Girard, who presented the primary report to the National Assembly on Monday morning.

Since the last budget was presented in March, income has increased in all budget columns in his department.

Inflation and the post-pandemic economic recovery explain this growth.

The Québec government’s budget forecasts are plausible, even auditor Guylaine Leclerc judges after analyzing the report.

The aim is to ensure that political parties “do not experience any surprises when they come to power,” she says.

pay for inflation

It is the income forecasts from personal income tax that are rising significantly and rapidly. Most recently, high inflation and favorable economic conditions drove wages and salaries up 9.4%.

The expected incremental growth affecting income tax is $2.3 billion for a total of $43.5 billion related to fiscal 2022-2023.

This progression should continue in 2022-2023 and then slow down in the following year to achieve more moderate growth.

Citizens’ tax accounts for 30% of all state revenue.

The consumption tax also allows the state to enrich itself.

tax reduction

After the Liberals and Conservatives, the CAQ government promises to lower the tax burden on individuals. “Quebecians are the most heavily taxed citizens in North America,” Secretary Girard said.

Despite this promise, he does not rule out handing out a check again to counteract inflation.

However, he refuses to reveal the details that will be associated with this tax cut. “We will do this in an orderly and responsible manner,” he said.

In the last budget, Quebec projected a $6.1 billion deficit and a return to balanced budgets in 2027-2028. The report now shows a deficit of just $729 million. The Department has also set aside provisions in the region of $2 billion per year for the full fiscal framework. Then there will be no trace of the structural deficit.

Nevertheless, Minister Girard is sticking to his 5-year horizon for a return to balanced budgets.

So Quebec could use the credit card to finance the tax cut. “We must not cut services. We must not go back to budgetary austerity,” said Mr Girard.

The same applies to the Liberal Party. “It’s nothing that would stop us,” said Carlos Leitão, the opposition’s official spokesman for public finances.

According to Mr. Leitão, the government has plenty of money, but vulnerable populations are suffering from the rising cost of living.

caution

In addition, the uncertainty hanging over the global economy could disrupt the only scenario envisaged by the Treasury Department, the Auditor General notes.

Among other things, she criticizes the lack of a Plan B in the government’s drawers. In particular, he points to the burst of inflation that is causing the tightening of monetary policy and the war in Ukraine. A scenario based on a recession would have made sense, Ms Leclerc argues.

For their part, Mr. Girard and his team estimate the risk of a recession at 35%. It evokes the existence of a margin of caution.

billions in taxes

4.9 million Quebecers paid income taxes in 2020

30% of all government revenue comes from individuals

In 2022-2023, Québec expects to recover $43.4 billion in this way.

Planned total sales: 144.5 billion US dollars