Quebec Finance Minister Eric Girard holds a copy of the 2023-24 budget speech as he responds to reporters at a news conference on March 20, in Quebec City.Jacques Boissinot
Quebec Finance Minister Eric Girard on Tuesday kept his party’s election promise to cut income taxes, as he projected economic growth to drop dramatically in 2023.
The minister’s budget for the 2023-24 fiscal year cuts taxes by one percentage point on the first two income tax brackets, saving an individual earner up to $814 a year. Quebec workers should start benefiting from the new rates in early July, when Girard said he expects the economy to be at its weakest point of the fiscal year.
Girard said the tax cuts – other than being a central plank in the Coalition Avenir Quebec’s election platform last fall – were included in the budget to stimulate the economy and attract workers to the province.
“The personal income tax cuts are designed for those who make between $30,000 and $90,000 – those are the ones who pay 36 per cent more income tax than in Ontario,” Girard told reporters in Quebec City.
For those who earn $98,540 or more, the cut will be worth $814 a year – but for the 2.2 million Quebeckers who earn $49,275 or less, they will save no more than $321.
The tax cuts will be funded, Girard said, with money that would have gone to the Generations Fund – into which the government is required to make annual payments dedicated to paying down the province’s debt. The government will reduce payments into that fund and use the money to cut taxes, he explained.
Girard said cutting taxes will delay the government’s goal of reducing the province’s net debt to 30 per cent of GDP. Instead of 10 years it will take 15, he said. The budget projects Quebec’s net debt to rise this fiscal year by $7.6 billion, to $215 billion, representing 37.7 per cent of GDP.
“It’s a fine balance between making sure that we will continue reducing the debt, but at the same time giving some oxygen to the economy, to Quebeckers, who are the No. 1 taxpayers in North America,” Girard said.
And as he announced some fiscal relief for Quebeckers, Girard projected that 2023 will be a “difficult year.”
Economic growth, he said, is expected to fall to 0.6 per cent this year, down from 2.8 per cent in 2022, before rising to 1.4 per cent in 2024. Last year’s budget forecasted two per cent GDP growth in 2023.
Girard said there’s a 50 per cent chance Quebec’s economy will fall into recession over the course of the fiscal year.
“The headwinds are global,” Girard said. “Quebec is a small, open, diversified economy; we are integrated in the North American market. What’s happening is that central banks all over the world are tightening monetary conditions to slow economic growth – and it’s working. 2023 is going to be, globally, a much smaller growth year than in 2022.”
But despite Girard’s gloomy predictions, the Opposition Liberals said his budget is not pessimistic enough.
“Recession is at our door,” Liberal finance critic Frederic Beauchemin told reporters, adding that Girard’s GDP growth projection of 0.6 per cent in 2023 is “rather optimistic.”
The recent bank failures in the United States and in Switzerland will encourage banks around the world to tighten lending, Beauchemin said.
“The movement of the American central bank to increase interest rates – they were doing it until they broke something; well, they broke it, and that has succeeded in tightening banking conditions, which is leading us even more seriously toward an economic slowdown,” he said.
Tuesday’s budget is the first since the CAQ won a second consecutive majority mandate in October and Girard’s fifth as finance minister.
The budget projects a deficit of about $1.6 billion, which rises to about $4 billion after it accounts for the payments into the Generations Fund. The deficit was $4.6 billion in 2022-23.
Girard said Quebec will return to a balanced budget in 2027-28, adding that if payments to the Generations Fund aren’t considered, the budget would be balanced in the 2025-26 fiscal year.
Government spending will increase by 0.7 per cent in 2023-24, to $148 billion. The budget for health care – the largest government expenditure – will rise by 7.7 per cent, to $59 billion, including $2.2 billion to make COVID-19 vaccination and screening sites permanent and to expand their services.
The education budget – the government’s second-largest expense – will rise by six per cent, to about $20 billion.
Girard’s said his “economic stimulus” package isn’t limited to tax cuts. The budget also includes measures to encourage people over 65 to keep working or to return to the workforce, which he said will help ease labour shortages. Starting Jan. 1, 2024, Quebeckers over the age of 65 who are in the workforce will have the option to stop paying into the Quebec pension plan, which will increase their after-tax income.