Quebec Finance Minister Carlos Leitao responds to the Opposition during question period Tuesday, December 2, 2014 at the legislature in Quebec City. Leitao will table an economic update later in the afternoon.Jacques Boissinot/The Canadian Press
Banks and insurance companies will pay. Union members will chip in, too. Drive a muscle car or pickup with a big engine? Get out your cheque book.
Quebec's Liberal government outlined new tax hikes and spending cuts Tuesday that will put $122-million in provincial coffers this year and $600-million in 2015-16, when Finance Minister Carlos Leitao says he will have the books in black. The measures come on top of $1.1-billion in cuts and fee hikes announced this fall that included a controversial rise in daycare fees.
How has Finance Minister Carlos Leitao found a path to fiscal balance without raising income or sales taxes or gutting major expenses such as health care? Call it the Reverse Stephen Harper. Where the Prime Minister has often micro-targeted tax breaks to key voting groups, Mr. Leitao is 85 per cent of the way to a balanced budget by cutting services and raising taxes on many constituencies unlikely to draw much public sympathy.
In the latest round unveiled in a mini-budget, Mr. Leitao announced he will cut in half the tax credit that professionals and workers get for paying union and other dues, impose a temporary payroll surtax on financial institutions, boost capital taxes on insurance companies, streamline tax breaks for research and development and impose a fee on people who drive vehicles with big engines.
Unionized workers with good jobs, muscle-car drivers, banks, lawyers and accountants are only the latest targets in the fight for fiscal prudence. Other measures introduced piecemeal through the fall include a dramatic rise in daycare fees for families making more than $125,000 a year, a threshold considered a rich elite by many Quebeckers. Doctors will see pay hikes spread out over years and will be punished if they don't start seeing more patients.
The civil service will see a freeze of staffing levels, and managers' bonuses will be reduced. School boards and municipalities will see funding cuts, and will have to decide whether to cut their own budgets or increase taxes on property owners. In two years, the government will have cut tax breaks and subsidies to business by 31 per cent, Mr. Leitao said.
Mr. Leitao said targeted spending cuts were the only way to go, given Quebeckers are already the most heavily taxed people in North America. He said the worst is now behind the province's taxpayers. "It's unthinkable to raise income tax or sales tax," he said.
Treasury Board president Martin Coiteux, who is leading the cost-cutting exercise, bristled at the suggestion they are micro-targeting services or unsympathetic and docile taxpayers. "You mention so many people and programs that we have readjusted that it's not micro-targeting," he said. "We spread the effort in a way that is just, is fair. And we always said it was a national effort."
There is no plan to raise the tuition fees of university students who kiboshed an attempted hike in 2012 through massive protest.
The budget plan came with a financial forecast that remains cloudy. Mr. Leitao said exports are stronger thanks to a rally in the U.S. economy and a weakening Canadian dollar. But Quebec's economic growth projections remain behind the Canadian average, government revenue has lagged projections and nearly 100,000 jobs have disappeared in the province in the past year.
"You'll have noticed in the many pages of this update there is no plan to relaunch the economy," said Nicolas Marceau, the Parti Québécois finance critic. "Because there is insufficient economic growth, the Liberals are relying on the formula they have always used, raising the financial burden of Quebeckers."
Polls show most Quebeckers support many of the moves the government has made, but broken promises may still trouble Philippe Couillard, who campaigned on a promise to kill a much more modest PQ daycare hike and to avoid taxing the middle class.
"The middle class will absorb half of the bill for a balanced budget," said François Legault, leader of the Coalition Avenir Québéc, who includes Hydro-Québec rate hikes in his calculation.
Mr. Leitao said he still needs to find a billion dollars in savings to guarantee balance in next spring's budget. He said government programs will absorb the bulk of the next cuts.
Les Perreaux