Next objective: Reduce the tax burden
Despite the Quebec government’s budgetary successes, let’s be realistic: We’ll need to do more to catch up with the rest of the country.
Although government spending is increasing much faster than population growth and inflation, we can nonetheless be happy that the Quebec budget is still in surplus, even after the payments to the Generations Fund. Yet this is a unique situation, largely due to the wisdom of the previous government and to revenues being much higher than expected.
Indeed, past efforts allow the CAQ government to appear very generous now, as seen in its March 10 budget. However, the good times risk being very short-lived if it continues down this path.
We need to remember that the Legault team’s generosity implies the growth of the Quebec government. It also means that the tax burden (the rate of taxation of Quebecers as a share of their income) continues to be significantly higher than the Canadian average. The tax burden amounted to 38.6% of GDP in Quebec in 2018, compared to an average of 32.2% for the rest of Canada.
If the CAQ government really wants Quebec to catch up to the rest of the country in terms of GDP per capita, as the Premier keeps repeating, it should not just rely on all-out spending. Expanding the welfare state will not help it achieve its goal.
Quebec should instead make sure that the public sector gradually gives up the overly large space it takes in economic development and hands it over to private sector entrepreneurs so that the Quebec economy can continue to grow faster than that of the other provinces.
Don’t take it from me. Just read the opinion piece by Thomas Friedman—far from a Republican, you’ll agree—in last weekend’s New York Times. According to Mr. Friedman, economic prosperity stems, now and always, from the vigour of the private sector and entrepreneurs.
After having reached its debt-to-GDP ratio reduction target five years earlier than planned, and with Quebec recording the lowest unemployment rate in the country, the time has come for the CAQ government to aim for a tax burden that is more favourable to economic growth. Given its desire to catch up to the ROC in terms of prosperity, this should be its top priority.