Continuing what Liberals started
Quebec Finance Minister Carlos Leitão, one of the world’s top economists before jumping into politics last year, is a man with a plan for fiscal reform on a massive scale.
Along with Treasury Board President Martin Coiteux, Leitão presented his second budget Thursday. It lays out the next steps in the gargantuan effort to overhaul the Quebec model of government, which has become unsustainable.
After more than $ 7.3 billion in spending cuts, fee hikes and business tax credit cancellations since the Liberal government’s first budget last June, Quebec will meet its target of a $ 2.3- billion deficit in 2014- 15 and balance its books in 2015- 16. This is a huge accomplishment that will benefit generations to come. But there is more work to be done.
The government’s big- picture plan hinges on restraining public spending, delivering programs more efficiently, making the Quebec economy more competitive and finally throwing a lifeline to the most highly taxed citizens in North America. On the first three issues, the government is doing exactly what it was elected to do — despite the fact that its actions haven’t always been easy or popular. But lightening the load for the beleaguered middle- class taxpayer remains unfinished business.
The budget holds growth in overall program spending for the coming year to a minuscule 1.2 per cent. This means Quebec is still in the throes of the short- term pain needed to achieve the long- term gain of eliminating structural deficits. This year will be especially tough for health and education, where rising costs exert
Quebec is still in the throes of the short- term pain needed to achieve the long- term gain of eliminating structural deficits.
the most pressure on government coffers. The effort aimed at making social services, especially health, more efficient will continue. After Bill 10, which reorganized the management of the health system, and Bill 20, which proposes to overhaul how doctors are paid, the budget announced the next pillar of this reform will be a move to patient- based funding.
The budget took the first steps toward an overhaul of the tax system, cherry- picking a handful of recommendations from the Godbout commission on taxation. Those measures include tax breaks for “experienced workers” to stay in the rapidly greying labour force and a tax shield to encourage the poorest Quebecers to work more without sacrificing social benefits that would otherwise be clawed back.
But the gradual elimination of the health contribution — a move that will benefit most Quebec taxpayers — will only begin in 2017 and take two years to be fully realized. Leitão said the next stage in the government’s massive reform is easing the burden for individual taxpayers. He just doesn’t know how it will be financed yet.
The Godbout report recommended lowering income tax rates and boosting provincial sales tax, an initiative that would be revenue neutral for state coffers. But Leitão warned that a consensus must be created before such a major change can be undertaken. Tackling the high income- tax burden is an urgent issue. As Coalition Avenir Québec Leader François Legault noted, the average Quebec family is out of pocket an extra $ 1,300 this year, thanks to the imposition of income- based daycare fees, hydro rate hikes and municipal property tax increases. Legault charged much of the return to a balanced budget has come at the expense of the middle class. Income tax relief is the missing piece of the Liberals’ financial reform. But the progress made in such a short time is commendable.