Will Quebec's tax cuts and extra spending stand in an uncertain economy? 5 key takeaways
Opposition parties say Quebec’s economic forecasts are too optimistic
Quebec presented an optimistic budget Tuesday, despite warnings from forecasters of a looming economic slowdown. The province is sticking to its election promise of reducing income taxes by one per cent, while increasing — although in some cases moderately — spending in health care, housing, transportation and education.
Quebec remains one of the provinces with the highest debt load, but Finance Minister Eric Girard said he is confident it can afford the extra spending and tax cuts and aim for a balanced budget by 2028.
One of the ways the Coalition Avenir Québec (CAQ) government has planned to finance this year's budget is by decreasing the province's contributions to the Generations Fund — a fund whose purpose is to help pay off Quebec's debt. Quebec had planned to reduce its debt 7.5 per cent within 10 years; that goal has been extended to 15 years.
Girard said the hope is that the tax savings will stimulate the economy amid predicted turbulence in the year ahead.
While Girard expects the province's economy to undergo a "period of transition" over the next year, with only 0.6 per cent growth, several Quebec economists have predicted about half that level of growth. Desjardins's prediction is more sober: a slight recession hitting the province later this year and the economy shrinking by 0.2 per cent.
Here are some of the key takeaways of the 2023-2024 budget.
Lower income brackets pay less
Quebecers will pay one per cent less in income taxes for the province's two lowest tax brackets. For the lowest tax bracket, the rate will be 14 instead of 15 per cent, representing savings of up to $329 per year on revenues of less than $49,275 per year.
For the $49,275 to $98,540 tax bracket, the percentage goes from 20 to 19 per cent of the yearly income or up to $814 less to pay per year.
The reductions are expected to cost the province $1.7 billion per year, or $9.2 billion over five years.
Girard says 4.6 million Quebecers will benefit from the reduction.
Investing in health care
The province has set aside an additional $5.6 billion over the next five years for the health-care system. The money will be spent on continuing to implement a reform announced last year by Health Minister Christian Dubé.
The measures include opening nurse practitioner health clinics, establishing Dubé's recently announced Santé Québec agency to improve services and making pandemic vaccination centres permanent front-line service clinics.
Nearly $1 billion in funding will go toward home-support services, $705 million is going to long-term care homes and $211 million for mental health, homelessness and addiction services.
Girard acknowledged the budget includes few measures for mental health care but that he spoke with the minister in charge of the file, Lionel Carmant,over the weekend about a plan to spread services among health-care practitioners.
Girard said the province still hopes to attract nurses in the private health-care system back into the public health network. Liberal health critic André Fortin said the measures announced in the budget are far from being enough to properly staff the new clinics and improve Quebec's health-care services, beleaguered by the pandemic.
Planning for possible recession
The 2023-2024 Quebec budget includes two alternative scenarios — one that factors in a possible recession of a 0.8 per cent reduction in economic growth, and one that factors in greater-than-anticipated growth of two per cent.
Since Girard gave an economic update in December, global economic forecasts are significantly less optimistic. The failure of Silicon Valley Bank and struggles at Crédit Suisse to weather rises in interest rates in recent weeks have, according to some economists, increased the chances of a potential recession later this year.
Tuesday, Girard said those factors have made it more probable that Quebec will have to implement its recession scenario budget, prompting it to dip into a contingency fund.
Girard said he is following the Bank of Canada's prediction that there will be zero per cent economic growth in Canada later this year, meaning there is a 50 per cent chance the country could go into a recession, either exceed that zero per cent or fall below it.
He said the province's financial framework is "really strong" thanks to Quebec's diverse economy, but Liberal finance critic Frédéric Beauchemin called Girard's outlook "seeing through rose-coloured glasses."
Funding for social housing
During last year's election campaign, the CAQ promised to build 11,000 social housing units over its next mandate. In this year's budget, it earmarked $1 billion over six years in funding for housing, with $650 million going toward completing 5,250 units.
Girard was pressed by reporters on the discrepancy. He said that is the commitment the government can make in this budget, but that there are still three budgets left in the CAQ's mandate.
Montreal Mayor Valérie Plante has said the city needs 2,000 more social housing units per year.
The government is also adjusting the housing component of the solidarity tax credit, increasing it by $78 per year for individuals in need of the credit and $126 for couples who can benefit from it.
Roads, public transit investment
The government will invest $722 million over the next five years on transportation, which includes additional public transit funding and money for road maintenance.
Girard said more than half of that will go toward making public transit more accessible over the next year and a half.
With ridership down during the pandemic, the province's major cities, such as Montreal, have had to make cuts in transit funding and have called on the province to help them pay down debts related to public transit.
Girard said decisions on how to allocate the money will be made later.
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