Quebec Finance Minister Eric Girard on Tuesday kept his party鈥檚 election promise to cut income taxes, as he projected economic growth to drop dramatically in 2023.
The minister鈥檚 budget for the 2023-24 fiscal year cuts taxes by one percentage point on the first two income tax brackets, saving an individual earner up to $814 a year. Quebec workers should start benefiting from the new rates in early July, when Girard said he expects the economy to be at its weakest point of the fiscal year.
Girard said the tax cuts 鈥� other than being a central plank in the Coalition Avenir Qu茅bec鈥檚 election platform last fall 鈥� were included in the budget to stimulate the economy and attract workers to the province.
鈥淭he personal income tax cuts are designed for those who make between $30,000 and $90,000 鈥� those are the ones who pay 36 per cent more income tax than in Ontario,鈥� Girard told reporters in Quebec City.
For those who earn $98,540 or more, the cut will be worth $814 a year 鈥� but for the 2.2 million Quebecers who earn $49,275 or less, they will save no more than $321.
The tax cuts will be funded, Girard said, with money that would have gone to the Generations Fund 鈥� into which the government is required to make annual payments dedicated to paying down the province鈥檚 debt. The government will reduce payments into that fund and use the money to cut taxes, he explained.
Girard said cutting taxes will delay the government鈥檚 goal of reducing the province鈥檚 net debt to 30 per cent of GDP. Instead of 10 years it will take 15, he said. The budget projects Quebec鈥檚 net debt to rise this fiscal year by $7.6 billion, to $215 billion, representing 37.7 per cent of GDP.
鈥淚t鈥檚 a fine balance between making sure that we will continue reducing the debt, but at the same time giving some oxygen to the economy, to Quebecers, who are the No. 1 taxpayers in North America,鈥� Girard said.
And as he announced some fiscal relief for Quebecers, Girard projected that 2023 will be a 鈥渄ifficult year.鈥�
Economic growth, he said, is expected to fall to 0.6 per cent this year, down from 2.8 per cent in 2022, before rising to 1.4 per cent in 2024. Last year鈥檚 budget forecasted two per cent GDP growth in 2023.
Girard said there鈥檚 a 50 per cent chance Quebec鈥檚 economy will fall into recession over the course of the fiscal year.
鈥淭he headwinds are global,鈥� Girard said. 鈥淨uebec is a small, open, diversified economy; we are integrated in the North American market. What鈥檚 happening is that central banks all over the world are tightening monetary conditions to slow economic growth 鈥� and it鈥檚 working. 2023 is going to be, globally, a much smaller growth year than in 2022.鈥�
But despite Girard鈥檚 gloomy predictions, the Opposition Liberals said his budget is not pessimistic enough.
鈥淩ecession is at our door,鈥� Liberal finance critic Frederic Beauchemin told reporters, adding that Girard鈥檚 GDP growth projection of 0.6 per cent in 2023 is 鈥渞ather optimistic.鈥�
The recent bank failures in the United States and in Switzerland will encourage banks around the world to tighten lending, Beauchemin said.
鈥淭he movement of the American central bank to increase interest rates 鈥� they were doing it until they broke something; well, they broke it, and that has succeeded in tightening banking conditions, which is leading us even more seriously toward an economic slowdown,鈥� he said.
Tuesday鈥檚 budget is the first since the CAQ won a second consecutive majority mandate in October and Girard鈥檚 fifth as finance minister.
The budget projects a deficit of about $1.6 billion, which rises to about $4 billion after it accounts for the payments into the Generations Fund. The deficit was $4.6 billion in 2022-23.
Girard said Quebec will return to a balanced budget in 2027-28, adding that if payments to the Generations Fund aren鈥檛 considered, the budget would be balanced in the 2025-26 fiscal year.
Government spending will increase by 0.7 per cent in 2023-24, to $148 billion. The budget for health care 鈥� the largest government expenditure 鈥� will rise by 7.7 per cent, to $59 billion, including $2.2 billion to make COVID-19 vaccination and screening sites permanent and to expand their services.
The education budget 鈥� the government鈥檚 second-largest expense 鈥� will rise by six per cent, to about $20 billion.
Girard鈥檚 said his 鈥渆conomic stimulus鈥� package isn鈥檛 limited to tax cuts. The budget also includes measures to encourage people over 65 to keep working or to return to the workforce, which he said will help ease labour shortages. Starting Jan. 1, 2024, Quebecers over the age of 65 who are in the workforce will have the option to stop paying into the Quebec pension plan, which will increase their after-tax income.
This report by The Canadian Press was first published on March 21, 2023.
Jacob Serebrin, The Canadian Press
