Quebec Liberals offer big tax cuts with elections less than a year away

Quebecers will be getting $1.2 billion worth of additional tax cuts this year thanks to a hefty surplus generated by a healthy economy, the provincial finance minister said Tuesday in an economic update.

With less than a year to go before the next scheduled election, Carlos Leitão announced annual tax relief that could range from $278 for individuals to $756 for a family of four with a combined income of $88,000.

The cuts take two forms. One is through a reduction in the lowest tax rate on earned income, which will drop from 16 per cent to 15 per cent in time for tax season. The other is a $100 per child supplement for school supplies.

Together with the elimination of the health contribution — contained in the March budget — the Liberal government said, all told, it has delivered $2.3 billion in permanent tax cuts over the course of its mandate.

''Tax cuts are intended to give the population some breathing space. It's something we said we would do," Leitão told reporters in Quebec City.

​Helping to finance the latest round of tax cuts was a $2.4 billion surplus for the 2016-2017 fiscal year — $2.1 billion more than initially forecast. That surplus, according to Leitão, was driven by stronger than expected economic growth, resulting in higher revenues.

In the March budget, Leitão had projected GDP growth of 1.7 per cent in 2017. That figure is now expected to be 2.6 per cent, due to higher household consumption and non-residential business investment.

''[The economy] is growing at unprecedented levels," said Premier Philippe Couillard. "Quality jobs are being created. That is why there is more money in the government coffers. Quebecers have a right to their share; they will get their share.''

However, a closer examination of the figures released on Tuesday indicates that most of the surplus — $1.3 billion worth — comes from reductions in program expenditures.

What's behind the surplus

Along with the tax cuts, Leitão is using the surplus to reinvest in social services that were subject to harsh belt-tightening measures in the early part of the Liberals' mandate.

Health and education will see their budgets increased by $630 million and $444 million respectively, but those amounts will be stretched over six years.

Those investments, he said, will enable the province to hire 500 elementary school professionals, such as speech therapists.

The money earmarked for the health sector will go to improving residential care services for seniors, as well as improving mental health services for vulnerable clienteles.

$25 million a year will be spent informing the public of the risks of cannabis use, in response to the federal legalization coming into effect in July 2018.

"They were acting out of caution when they decided to clean house," said Marie-Soleil Tremblay, accounting professor at the École Nationale d'Administration Publique. "They decided to take everything out, and now they're deciding to put things back in."

Leitão, for his part, was unapologetic about having reigned in spending so dramatically in previous budgets.

''I regret nothing because we had to do it,'' he said.

An electoral ploy

The Parti Québécois's finance critic, Nicolas Marceau, said the tax cuts would do little to compensate for the suffering Quebecers underwent during the lean years of Couillard's government.

''Quebecers would have preferred better services for the sick and for children, rather than $278 per year," said Marceau.

The right-of-centre Coalition Avenir Québec, which has surged in recent opinion polls, welcomed the Liberal government's decision to cut taxes, but decried its timing, coming as it does during an election year.

"My cynicism meter is at 100 per cent today," said the CAQ's finance critic, François Bonnardel. He described the tax cuts as the Liberals ''playing their last card before the election.''

​The Liberals are hoping the economic update will reinforce their claims to be sound managers of the public purse and able stewards of the economy.

The document is sprinkled with claims about their success: 201,800 jobs created since 2014, an unemployment rate at a record low, rising wages.

Moreover, the update lands at the end of several difficult weeks for the government. It was forced to backtrack on its promised systemic racism commission; it's been criticized from all sides for its religious neutrality law, and it lost a byelection in a riding once considered a stronghold.

Later this year, the Liberal government will release details of its long-awaited anti-poverty plan — another opportunity for it to soften its image ahead of next year's election.