The Liberal government of Philippe Couillard is beginning to give back some of the budgetary surpluses generated by the party’s years of deficit- busting spending controls.
Finance Minister Carlos Leitão announced a tax cut of $278 for most taxpayers this year and next in his November 2017 budget update, the result of trimming taxes on the first $42,705 of taxable income to 15% from 16%.
Leitão also promised the parents of all school-aged children a $100 cheque for school supplies this year and another $100 next September – early signs of what may be to come as next year’s October election approaches.
These seemingly modest givebacks will cost the provincial treasury $1.083 billion. At the same time, Leitão announced new spending of $256 million in the coming year for health, education, regional development and the fight against poverty. Clearly, the increasingly unpopular Liberals are trying to repair some of the damage caused by several years of painful cutbacks.
It’s no mystery why the Quebec Liberals are proposing tax relief for young, middle-income families.
Successive polls, before and after the tax cuts were announced, have Couillard’s Liberals trailing the Coalition Avenir Québec, the party founded by François Legault, a former Parti Québécois minister who also has business cred: he became a millionaire after founding the charter airline Air Transat.
Now, Legault wants to make Quebecers rich, promising even more tax cuts and setting the ambitious goal of weaning the province off the equalization payments it still receives from Ottawa.
Those payments for the current fiscal year are about $10 billion – 10% of the total provincial budget. The payments will rise to $11 billion next year.
Legault’s plan to make Quebecers richer includes developing oil and gas discoveries in the province. His timing, however, may be questionable. Quebecers are increasingly calling for hydrocarbons to be left in the ground to offset climate change.
Couillard’s response is to dismiss Legault as an improviser, forever changing his mind. But ideas out of left field can fire the imagination of voters. Newcomer Valérie Plante upset Denis Coderre, a veteran politician and serving mayor, in the recent Montreal election. Among other initiatives, she promised a new “pink line” for the city’s colour-coded Métro.
Inspired by Plante, perhaps, Couillard has promised an electrified monorail. The goal is to reduce the travel time on the 250-kilometre stretch between Montreal and Quebec City to one hour.
Although the monorail idea has been met largely with indifference, the Couillard government is undaunted, backing a third bridge across the St. Lawrence between Quebec City and Lévis.
Leitão has one more budget to present and is sitting on a $4.6-billion “stabilization reserve,” which could grow even larger before his budget next spring.
That pile of cash could give the Liberals the strong hand they will need to deliver on their expensive promises.
© 2018 Investment Executive. All rights reserved.
Past time for action on retail bank shelves
Editorial: Investors are no better off today than they were at this time last year