The tax cut promised by the Legault government is arousing divergent opinions in the business community. For some associations, it is high time to reduce the tax burden, which is heavier in Quebec. Others would prefer that we prioritize the consolidation of public finances before giving up revenue.
For sometimes different reasons, economists, civil society groups and trade unions have come out into the public square to ask the Minister of Finance, Eric Girard, to abandon the Coalition avenir Québec (CAQ) election promise to lower personal income tax by reducing deposits in the Generations Fund. Rather than lowering taxes, some stakeholders would prefer more investment in public services, while others would prioritize reducing the debt burden.
Quebec would be wrong to renege on its promise in the face of the multiplication of criticism, judges the vice-president for Quebec of the Canadian Federation of Independent Business, François Vincent. “There was an election,” he said in an interview. There was a strong mandate given to the Coalition avenir Québec. It was one of their main commitments. I don’t understand why there is such a strong outcry […] when we have already had the debate. »
The numerous “outcrys” would not reflect public opinion, believes Mr. Vincent. To get to the bottom of it, the association that represents SMEs commissioned a survey from the firm Léger. Nearly two-thirds (64%) of respondents believe that “lowering taxes is a good measure to help them in a context of high inflation”. However, the question did not focus on their preference between a tax cut, reinvestment in public services or an acceleration of the return to balanced budgets.
The Board of Trade of Metropolitan Montreal also sees the CAQ’s election promise favorably. She points out that Quebecers with an income of between $20,000 and $80,000 pay 28% more tax than Ontarians, in her brief for the pre-budget consultations.
The wrong time?
At the Conseil du patronat du Québec (CPQ), we believe that the time is not right to reduce personal taxes. In an interview, its chief economist, Norma Kozhaya, points out that Quebec has not yet reached the balanced budget forecast for 2027. There are also questions regarding whether a tax cut is not counterproductive to a time when central banks are trying to fight inflation.
The main reason for the CPQ’s reluctance is that the tax cut will be financed by a reduction in payments to the Generations Fund. “We think that what is dedicated to payment to the Generations Fund should remain so and be allocated to debt reduction,” she comments. She concedes that the objective of reducing the gross debt to 45% of GDP by March 2026 has already been achieved, but that of 17% of GDP for the debt representing accumulated deficits has not yet been achieved.
For his part, Mr. Vincent believes that the tax reduction must be adopted without delay. “I have confidence in the Minister of Finance. They looked at this. They will nevertheless return to a balanced budget within a reasonable period of time. He points out that the sums paid into the Generations Fund have increased since it was created in 2006. The payment should reach $3.2 billion for the 2022-2023 fiscal year, compared to $584 million in 2006-2007.
“We talk regarding intergenerational equity, but ensuring a more advantageous tax burden for young people is also intergenerational equity. That we remain the most taxed is not necessarily the best thing. »