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Quebecers’ tax burden: We’ve reached the tipping point

Montreal, Tuesday, April 14, 2015 – Quebec income taxes and other levies have become so heavy that they are undermining economic growth and reducing the disposable incomes of Quebecers, according to a Viewpoint on the tax burden of Quebecers published today by the MEI.

In 2013, for the first time in 17 years, disposable income—the portion of income that one can devote to consumption and saving after transfers—has fallen in Quebec, accounting for inflation. Market incomes are stagnating, while income taxes and contributions of all kinds are increasing, explains Youri Chassin, co-author of the Viewpoint.

Since the weight of the tax burden reduces the incentive to work all while discouraging private investment, this also has an effect on economic growth. Indeed, if Quebec had kept pace with the Canadian average between 2003 and 2013, the province’s GDP would be $32 billion higher today. As for disposable income, if it had increased at the same rate as the Canadian average, each Quebecer would have some $1,680 more today.

Under the circumstances, reducing Quebecers’ tax burden is an especially worthwhile goal, declares the co-author. “Controlling spending and eventually recording surpluses will allow us to reduce the fiscal burden for Quebec taxpayers and help boost the economy.”

Disposable income growth in Quebec was the second lowest in Canada between 2003 and 2013, while the sums paid by taxpayers to the two levels of government were among the highest as a proportion of disposable income.

“When you look at the provinces with higher disposable income growth, not only are individuals in these provinces less heavily taxed, but they are also less and less dependent on government transfers. Unfortunately, Quebec’s income taxes and contributions are much higher than the Canadian average, and its dependence ratio is rising,” explains Youri Chassin.

“The multiple tax hikes and fee hikes of recent years—what we might call ‘austerity through taxes,’—certainly harm the Quebec economy instead of helping it,” says Michel Kelly-Gagnon, President and CEO of the MEI. “It’s time to realize that the state has a spending control problem, not a revenue problem. It’s time to break out of this vicious cycle we’re in.”

The Viewpoint entitled “The Tax Burden and Disposable Income of Quebecers” was prepared by Youri Chassin in collaboration with Alexandre Moreau, respectively Economist and Research Director and Public Policy Analyst at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Mariam Diaby, Communications Director, Montreal Economic Institute / Tel.: 514-273-0969 ext. 2231 / Cell.: 514-668-3063 / Email: mdiaby@iedm.org

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