Quebec Budget: A record deficit and ever more subsidies, laments the MEI

• Without the revenue from the increase in the capital gains inclusion rate, the deficit would be $651 million n 2029-30.

Quebec, March 25, 2025 – The Legault government’s financial management plays fast and loose, warns an MEI researcher in response to the 2025-2026 budget tabled earlier today by Finance Minister Eric Girard.

“For the second year in a row, the Legault government plans to smash deficit records,” says Gabriel Giguère, senior policy analyst at the MEI. “Minister Girard seems much better at finding reasons to run deficits than he is at finding and eliminating waste in government.”

The Quebec government expects to run a deficit of $13.6 billion this year. This is $4.4 billion more than was projected in November.

The 2025-26 deficit would therefore be the largest in Quebec’s history, ahead of the $10.8 billion, $10.4 billion and $8.0 billion deficits run in fiscal years 2020-21, 2024-25 and 2023-24, respectively.

It is estimated that the government will return to a balanced budget in 2029-30.

However, the MEI researcher questions Minister Girard’s decision to include the increase the capital gains inclusion rate in this budget’s revenue assumptions.

Last Friday, Canada’s Prime Minister, Mark Carney, confirmed that his government was dropping the capital gains tax inclusion rate for good, but would maintain the proposed alleviation measures.

For his part, Conservative leader Pierre Poilievre had already announced that he would cancel the capital gains tax increase if elected.

In his budget, minister Girard still includes $752.4 million in revenues attributable to the increase in the capital gains inclusion rate for 2029-30.

According to the researcher, the deficit would be $651 million in 2029-30, delaying the return to balance by one year.

“Federally, both the Liberals and the Conservatives have made it very clear that this tax increase was a thing of the past,” says Giguère. “It’s about time the minister confirmed that he too will abandon this bad idea and put forward a real plan to balance the budget.”

Estimates have this year’s interest payments on Quebec’s debt reaching $9.7 billion. This amount is more than is allocated to the Ministry of Families for the same period.

Portfolio spending by the provincial government will reach $156.1 billion this year. This represents an increase of 59.7 per cent since the Legault government took office.

“Since the Legault government took office, it has been characterized by its spendthrift nature,” adds Giguère. “If the government faces such a large deficit today, it’s not so much because of external problems as it is due to its propensity to see spending as the unique solution to every problem.”

Mr. Giguère specifically mentions Investissement Québec’s FRONTIERE program, announced earlier this month, which consists of loans of up to $50 million per company at an estimated cost of $500 million in the most recent budget.

He argues that it would be preferable to attract investment by lowering the tax burden on Quebec companies.

According to the most recent available data, taxes account for 39.7 per cent of Quebec’s economy, a percentage six points higher than the average for the rest of the country.

He also recommends adopting legislation similar to Nova Scotia’s Bill 36 in order to completely eliminate trade barriers with the other Canadian provinces.

“High taxes, burdensome regulations and barriers to trade are impeding the growth of Quebec companies and their goal of expanding into new markets,” says Giguère. “Rather than pulling out its cheque book, yet again, the government would have been able to create a stronger, more resilient economy by addressing these issues.”

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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