Premier Philippe Couillard’s Quebec Liberals were elected in 2014 on a promise to take care of business, to deal with “the real issues” – better fiscal performance for the province.
Luc Godbout, a Université de Sherbrooke tax expert, was commissioned to come up with a bold plan for a better tax system. His findings: Quebec could cut income taxes by $3.4 billion in a revenue-neutral manoeuvre that also would increase the sales tax by one percentage point, to 11% – or 16% for the harmonized Quebec/federal sales tax.
The shift from income to consumption taxes would mean paying more for daycare, hydro, alcohol and fuel taxes. With more money in Quebecers’ pockets, local consumers would spend more, Godbout reasons, calculating that the changes would result in a $1-billion economic gain.
But these ambitious plans appear to have been shelved – for now, at least. Couillard has promised a third consecutive balanced budget, with more spending for health, education and economic development, as well as a tax cut. No mention of tax reform. Although Godbout’s report landed in 2015, there has been little evidence the government intends to adopt the report’s suggestions – perhaps because things like a big hike in sales taxes can be politically toxic.
In Canada, the federal government and eight of 10 provinces are running deficits. Only British Columbia, where the economy is booming, and Quebec, where the purse strings are held tightly, have balanced budgets. And Couillard would like some credit for that.
For the current fiscal year, figures indicate Quebec Finance Minister Carlos Leitão is carrying a $3.8-billion surplus, thanks to a 2.9% increase in revenue and a spending increase of only 1.7% for the year (which was further reduced to 0.9%, thanks to lower debt servicing costs).
Not everyone is happy. Couillard’s opponents call his spending controls “austerity.” The premier’s response is that his government has not cut spending, but merely the rate of increase. And, overall, voters seem to agree. In successive polls, the Quebec Liberals have maintained their lead.
But now, there is a wild card on Quebec’s political landscape. Gabriel Nadeau-Dubois was the most visible leader of Quebec’s 2012 “Maple Spring” protests, provoked by a $1,625 tuition hike proposed by Jean Charest’s Quebec Liberals. The announcement that Nadeau-Dubois will run for the left-wing Québec Solidaire party and seek a leadership role has shaken Quebec politics, with Québec Solidaire gaining thousands of new members. And the Parti Québécois, condemned by Nadeau-Dubois for being too close to the Quebec Liberals, stands to lose, thus giving Couillard a boost.
Nadeau-Dubois also has a plan for tax reform, calling for free university tuition to be paid for by higher taxes. He says Quebecers would willingly pay – if they can be assured of an end to corruption, which would ensure the money is spent where intended.
Couillard may have forgotten his promise of tax reform, only to have a new tax-reform agenda emerge from the left.
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Past time for action on retail bank shelves
Editorial: Investors are no better off today than they were at this time last year