What will be in the Girard budget? | Quebec Budget 2023
Quebec Finance Minister Eric Girard during the traditional photo opportunity preceding the tabling of the budget in the National Assembly.
Despite dark clouds on the horizon and the prospect of a recession, the Government of Quebec, which is counting on a better than expected financial balance sheet, should announce tax cuts in its budget tabled today by the Minister of Finance , Eric Girard.
Inflationary context, rising interest rates, economic slowdown, highly volatile stock markets, this balancing act is taking place in a highly unpredictable period.
Although the picture could darken in the coming months, Premier François Legault recently confirmed that his government will move forward with tax cuts. The objective: to relieve Quebecers in times of inflation, a flagship promise of the Coalition avenir Québec (CAQ) during the last election campaign.
“I think we have to help the middle class. […] I think that we are capable, with the current situation of public finances, both of giving respite on the tax side, of putting money back in the pockets of Quebecers, including the middle class, and continue to better fund services. »
— François Legault, Premier of Quebec
In the winter, Minister Girard made the same prognosis. In general, the government respects its commitments, he told journalists.
The table is therefore set for a tax cut. But what will it look like? During the last campaign, the CAQ committed to reducing the first two tax brackets of taxpayers by 1%.
Concretely, for a person earning $30,000 per year, the tax reduction would be $109, according to the estimates made in the CAQ's electoral platform in 2022. For a worker earning $50,000, the reduction would be $329. This year. And for someone earning $100,000, the drop would be $810.
However, the measure will cost nearly $2 billion in 2023 alone, according to the estimate of the Chair in Taxation and Public Finance at the University of Sherbrooke, and will be financed by reducing payments into the Generations Fund, which must be used debt repayment.
While the measure is likely to be popular for many Quebecers whose budgets are much tighter in this period of inflation, it remains criticized by certain groups, in particular the big trade union centers which would like an increase in investment in public services.
What's more, the decline will not benefit the less well-off, recalled the Institute for Socio-Economic Research and Information (IRIS), in a study published last week.
According to data from this progressive institute, nearly 35% of the Quebec population will not have enough income to take advantage of the tax relief. It would be an unfair tax cut, because it would mainly favor taxpayers with higher incomes, lamented researcher Guillaume Hébert, in an interview with Radio-Canada.
Quebec government should go ahead with tax cuts.
That said, the CAQ government also wants to increase spending on state missions such as health and education. His fiscal framework last campaign called for almost $30 billion in additional spending.
I think they will increase health care spending quite significantly and I believes that education is a top priority, said the director of the Institute for Canadian Studies at McGill University, Daniel Béland, in an interview with CBC.
Moreover, voices are being heard calling for the government to significantly increase funding for the health care system.
The Association pour la santé publique du Québec (ASPQ) is asking in particular to increase Funding an additional $1 billion a year as the aging population puts more pressure on the health care system.
With the recent events that have shaken Quebec, including the tragedy in Amqui, Premier François Legault has also promised to put more money into mental health services. We must do more, he said a few days ago.
To fight inflation, Quebec had already loosened the purse strings during the last economic update, last December, by deploying its anti-inflation shield with additional investments of $13 billion over the next five years.
In addition, the government will provide $8.1 billion to increase the amount of support for seniors, $3.5 billion to fund the $400 and $600 checks sent to taxpayers and $1.6 billion to fund the capping of the indexation of several government tariffs (notably Hydro-Québec).
Financial assistance for public transit should also be announced in the budget. According to the Association des transporters urbains du Québec, the shortfall will reach $565 million this year for transport companies. Other investments are also to be expected in the fight against climate change.
Some would also like the government to tackle the labor shortage, which is more glaring in Quebec than elsewhere in Canada, and to the housing crisis, which is raging in several regions.
If the government can announce both tax cuts and an increase in spending in its missions, it is in particular because of a better than expected financial picture.
En last February, Minister Girard spoke of a year 2023 full of questions, but a controlled financial situation for Quebec.
It is always going to be a difficult year, because there are there have been significant rate increases and this affects individuals and businesses. Nevertheless, the start of the year is stronger than expected and that is positive, he underlined.
During last December's financial update, Quebec had revised its budget deficit downwards. While it was $6.5 billion in the forecasts of the last March 2022 budget, it should be $5.2 billion as of March 31, 2023. The government still planned to return to a balanced budget in 2027-2028.
Québec was also counting on a growth scenario of 0.7% in 2023, down sharply from the 2% increase forecast in March 2022.
But there are still several question marks. How will inflation behave in the coming months? And with rising interest rates, fragility in the banking sector, and anticipated credit crunch, would a recession, if it occurs, be stronger than anticipated?
< p class="e-p">Last December, Quebec also predicted a recession scenario. In such a case, economic activity would decline by 1% in 2023 before increasing by 1.2% in 2024. With the expected decline in inflation and an economic slowdown, revenues could therefore be lower for the government.
That said, Quebec can also count on a solid job market with the addition of 129,700 jobs in 2022. Last year, the unemployment rate was also at its lowest since 1976, at 4.3%.