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Inflation emerges as main issue in Quebec campaign. Whose plan will help you more?

The opening days of the Quebec election campaign have been dominated by different proposals to help Quebecers deal with the higher cost of living. 

It is not a surprising development, per se, given inflation is at levels not seen since the early 1980s. 

But in Canada’s most heavily taxed province, it was suddenly hard to find a political leader not vowing to put money back into the average voter’s pocket.

There are, however, important differences between how the parties aim to accomplish the feat. Some are focused on cutting income taxes, while others are targetting consumption taxes or tax credits. 

Arguably the biggest difference, though, is in how the parties plan to finance their inflation relief: Do we pay for it now, with money on-hand, or stick future generations with the bill?

Each of these options involves a set of trade-offs, and understanding whose interests a party is prioritizing might help voters figure out which box to check come election day, Oct. 3.

The income-tax-cut approach

On Monday, the first full day of campaigning, both the Coalition Avenir Québec and the Liberals put forward proposals to cut income taxes. 

The CAQ, seeking another four years in government, announced it would slice one percentage point from the lowest two income brackets, a measure it said would cost the government $7.4 billion over a four-year mandate.

“We, the CAQ, think Quebecers should have the choice about what to do with their money,” party leader François Legault said.

He also reiterated an earlier promise that, if re-elected, most of the province would receive another round of inflation-relief cheques, ranging between $400-$600.

inflation emerges as main issue in quebec campaign whose plan will help you more
CAQ leader François Legault said, if re-elected, his party would slice one percentage point from the first two income brackets. (Mathieu Potvin/Radio-Canada)

But the controversial part of this plan was the proposal to pay for it by tapping into the Generations Fund, a stash of money the Quebec government has used to reduce its once-troubling debt burden.

By most accounts, the fund has been a success. Since it was created by Jean Charest’s Liberal government in 2006, Quebec’s debt-to-GDP ratio has gone from being nearly twice the Canadian average to nearly on par with the other provinces.

So Legault’s desire to raid the fund for the sake of an election promise left public finance experts uneasy.

“To satisfy voters in the short term, we are hurting the long-term balance of Quebec’s public finances,” Olivier Jacques, a political scientist at the Université de Montréal, wrote in an op-ed published in La Presse.

Jacques estimated the promise could end up stripping as much as $10 billion from the Generations Fund, money that won’t be available for “future generations to deal with the challenges they will face.” 

Force Jeunesse, a province-wide youth advocacy group, accused Legault of hobbling the Quebec government’s ability to deal with long-term challenges, such as a climate change, which are also major priorities for young voters.

“Often people say youth are cynical and not interested in politics, well it’s this short-term vision that discourages young people,” the group’s president, 28-year-old Simon Telles, told Radio-Canada. 

The income-tax-plus approach

The Liberal income-tax proposal goes a bit further than the CAQ’s, offering to shave 1.5 percentage points off the first two income brackets. A proposal by the Quebec Conservatives would cut two percentage from the same two brackets, but the party hasn’t yet provided details about how the cuts will be financed.

By way of comparison, a family making $80,000 would get an extra $425 under the CAQ plan, $637.50 under the Liberal’s and $850 under the Conservatives.

In addition, the Liberals are promising to abolish the sales tax on certain essential items, freeze Hydro-Quebec rates and increase payouts under the solidarity tax credit.

It’s a costly package. The tax cuts alone would cost $4 billion this year. Unlike the CAQ, though, the Liberals say they will fund this mainly by incurring deficits instead of using the Generations Fund.

inflation emerges as main issue in quebec campaign whose plan will help you more 1
‘It is possible to cut taxes without putting future generations in debt, which is what François Legault is promising,’ said Liberal Leader Dominique Anglande. (Karoline Boucher/La Presse Canadienne)

“It is possible to cut taxes without putting future generations in debt, which is what François Legault is promising,” said Liberal Leader Dominique Anglande on Twitter.

While public finance experts lauded some elements of the Liberal plan, like the proposal to boost the solidarity tax credit, they noted it shares some similarities with the CAQ’s approach to inflation. 

Both parties want to cut income taxes, a measure that is hard to reverse for obvious political reasons — everyone wants to cut taxes, no one wants to raise them. 

In other words, they are proposing long-term cuts to the state’s ability to raise revenues to address what is, effectively, a short-term economic problem. 

Quebec may have excess fiscal capacity at the moment, a surplus of $2.4 billion is expected for 2022-2023 thanks in part to revenues boosted by inflation.

But what will the province’s fiscal capacity be in 15 or 20 years, when health-care and climate-change costs will be much higher than they are now?

Speaking on Radio-Canada’s Zone économie, economist Pier-André Bouchard-St-Amant said public economics is often about choosing between economic efficiency (tax cuts) or reducing inequalities, be they short-term (income distribution) or long-term (debt).

“Today we have two political parties who chose efficiency at the expense of the two other dimensions. It’s a political choice,” Bouchard-St-Amant said.

The progressive approach?   

On the progressive side of Quebec’s political spectrum, there is also a desire to address cost-of-living issues but both parties have ruled out income tax cuts.

Québec Solidaire, which aspires to replace the Liberals as the CAQ’s main opponent, also put forward a plan to remove the 9.975-per cent provincial sales tax on a large basket of essential items. 

The party’s parliamentary leader and main campaign spokesperson, Gabriel Nadeau-Dubois, said the measure would be temporary, and phased out once inflation returns to three per cent. 

inflation emerges as main issue in quebec campaign whose plan will help you more 2
Québec Solidaire’s main campaign spokesperson, Gabriel Nadeau-Dubois, said his party would cut the consumption tax on certain essential goods. (Dany Pilote/Radio-Canada)

Restaurant bills, groceries, clothes and personal hygiene items would be among the goods spared sales tax. This would save a family around $1,100 annually, according to estimates provided by the party. 

But details of the policy are an odd fit for a party trying to be the progressive alternative to the conservative CAQ. 

One, cutting sales tax means high-income earners will benefit, even if they don’t need the help. Two, economists were puzzled why restaurants were included on the list.

“Why would you cut taxes on restaurants? This is not essential,” said Dalibor Stevanovic, who holds a chair in macroeconomics and forecasting at the Université du Québec à Montréal.

Stevanovic also pointed out the measure would act as an incentive, drawing customers to an industry already struggling to deal with a severe labour shortage. 

inflation emerges as main issue in quebec campaign whose plan will help you more 3
Paul St-Pierre Plamondon, the PQ leader, said a PQ government would offer a number of one-time payments financed by the current surpluses. (Valérie Gamache/Radio-Canada)

The PQ, which in recent years has adopted a conservative approach to identity and immigration issues,  has put forward what may be the most progressive way of dealing with inflation.

On Wednesday, leader Paul St-Pierre Plamondon said a PQ government would offer a number of one-time payments financed by the current surpluses.

These include $1,200 for people making less than $50,000, and $750 for those making between $50,000 and $80,000. 

Like the Liberals, he also promised to double the amounts available under the solidarity tax credit.

It’s the latter measure that economists maintain is the most efficient way of helping those who are struggling with higher costs of living. 

“If we endorse the idea that we should offer households relief, I would have preferred to see an increase in the solidarity tax credit in a uniform way rather than an abolition of the taxes on targeted products,” said Bouchard-St-Amant.

Are you a Quebecer struggling to deal with the higher cost of living? We want to hear your story. Email us: assignmentmontreal@cbc.ca 

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