Charest defies ADQ with $950M tax cuts in budget

Action Démocratique du Québec won't support it: PQ not yet sure how it will vote

Last Updated: Thursday, May 24, 2007 | 6:58 PM ET

CBC News

Quebec's Liberal minority government took a calculated risk Thursday, tabling a budget with nearly $1 billion in income tax cuts despite opposition threats to vote against such measures.

Quebec Premier Jean Charest smiles as he receives a copy of the budget from Finance Minister Monique Jérôme-Forget, calling it 'our baby.' The $53.8-billion budget, tabled later in the day, contained tax cuts worth $950 million.
(Jacques Boissinot/Canadian Press)

The $950 million in tax cuts, mostly benefiting middle-class workers, play a starring role in Premier Jean Charest's first minority budget, tabled by Finance Minister Monique Jérôme-Forget in Quebec City.

Action Démocratique du Québec had earlier warned it wouldn't stand for the tax cuts, which the Liberals plan to fund by drawing on federal transfer payments.

But Jérôme-Forget said the $53.8-billion budget includes some measures that echo accountability and spending controls demanded by the opposition. She said she therefore doubted the opposition parties would bring it down.

"We tried to find a balance" between Liberal goals and the opposition's demands, Jérôme-Forget said.

"The two parties can overthrow the government for all kinds of reasons, including the budget. I don't know if it will be seen particularly well to relaunch ourselves into an election campaign."

Changes to income tax brackets:
16% tax will apply to incomes under $37,500 (currently for incomes under $29,290). 20% tax for incomes of $37,500 to $75,000 (currently for $29,290 to $58,595). 24% tax for incomes above $75,000 (currently for those above $58,595). The basic tax credit will be raised to $10,215, from $9,745.

Jérôme-Forget called her budget "a new way of doing" marked by "rigour and transparency," controlling spending while fulfilling the Liberal government's priorities of health care, education and debt reduction.

The Liberals need either the Action Démocratique du Québec or the Parti Québécois to back the budget in order to preserve their government. That's because the March election left them with only 48 seats in the 125-seat national assembly, compared to 41 for the ADQ and 36 for the PQ.

Highlights include $23.8B for health care

The budget highlights include:

• $23.8 billion for health care (a six per cent increase).
• Fast-track measures to eliminate the capital tax for businesses by 2011.
• $30 billion to repair and do maintenance on hospitals, schools and roads.
• $13.4 billion for education, including money to hire special needs educators (five per cent increase).
• $200 million payment into a debt reduction fund.

The budget also announced a new health care financing commission headed by former Quebec health care minister Claude Castonguay, which will likely open the door to further privatization of services.

What the tax cuts mean for you:
The Liberal budget's $950 million in tax cuts target the middle class. Finance Minister Monique Jérôme-Forget says an average two-income family with two dependent children could see as much as $2,000 in tax cuts under the new budget. A household headed by a single person earning $35,000 and living alone could get $220 in tax cuts.

The budget also promises to reform Quebec's accounting practices through two measures: first, by including certain provincial agencies such as the liquor board in annual audits, and second, by adding school board, college and hospital deficits to the province's ledger book.

The budget proposes further measures to shrink the public sector through employee attrition and by privatizing five government services: vehicle fleet management, road signs, the province's radio-communications network, office furniture and supplies management, and government documentation.

Opposition slams budget

The ADQ said it was fully prepared to strike down the budget when it comes up for vote next week — even if it risks triggering an election.

ADQ finance critic Gilles Taillon criticized the fact that the Liberals planned to fund the tax cuts through federal transfer payments promised in the recent federal budget. The money, $700 million, was earmarked to address the so-called fiscal imbalance.

Given that Quebec has a $122 billion debt, Taillon said, tax cuts that draw from transfer payments amount to "taxing our future workers and children."

"We're remortgaging the house and selling the land," Taillon said.

"We think it would be better to reduce the debt, and to use the fiscal imbalance resources to improve health care and education."

PQ finance critic François Legault called the budget "without vision, irresponsible" and full of "recycled announcements" that do not satisfy the party's demands for increased education funding.

Legault said it was too soon to say whether the PQ would vote against the budget: "The decision is not made right now, and will be made in caucus with all of us."

The party has approached the Liberals about possible amendments but hasn't heard back, Legault said.