Quebec, Canada’s second-largest province, is cutting income taxes and reducing the amount it’s socking away in a debt-repayment fund as it braces for a period of slow growth and economic uncertainty.
Finance Minister Eric Girard’s new budget trims the tax rate in the lowest two income brackets, a break equal to $814 for those earning more than $98,000 a year. The government is also sweetening a tax holiday for companies that make large investments, aiming to lure new projects in electric vehicle battery manufacturing and other sectors.
“It’s going to stimulate economic growth and increase the work supply,” Girard said at a press conference in Quebec City. “There will not be, and I want to make this very clear, any impact on public services.” The income tax cuts will reduce provincial tax revenue by $1.7 billion annually. To pay for it, the government is reducing its contributions to the Generations Fund, a reserve fund that’s dedicated to future debt payments and managed by the Caisse de Depot et Placement du Quebec.
“The government has rose-colored glasses,” Beauchemin said. The economic risks are high, he said, and Girard’s use of the Generations Fund to pay for tax cuts is a bad idea because the fund has historically generated returns above 6 per cent, much higher than Quebec’s cost of borrowing. “The government decided to take the most expensive way of financing.”
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