The figure jumps to the imagination: 3,500 million dollars in checks to taxpayers, some of whom earn $100,000. What an electoral decision, say many Quebecers, who would have preferred to see the money invested in health or education, for example.
Posted at 6:30 am
What do I think of that? Yes and no, it is electoral. And yes and no, it harms the policy of the Bank of Canada, which wants to break inflation by raising interest rates. And here’s why.
First, what is unanimous is that we must help the less fortunate to get through this difficult period of inflation. As you have seen, the shopping basket has increased considerably over the last year, an average of 11%. And for all expenses, inflation is 6.9%.
But what is a modest income? In its recent economic statement, the Trudeau government, which criticizes the Quebec checks, implicitly answered the question.
To help taxpayers heal the wounds of inflation, the financial statement will increase certain amounts for so-called modest taxpayers, whose income, for a single person, is set at less than $50,000 ($49,166).
This figure corresponds to the threshold at which singles no longer receive assistance to offset GST on their purchases, known as the GST credit. The federal statement increased this amount granted to those under $50,000 by 50% in order to alleviate inflation.
For a single person, it is the equivalent of an additional check of $234, maximum. The measure is non-recurring.
And the Legault government measure? Well, in Quebec, the group of taxpayers who earn $50,000 or less – the so-called modest income – represents 4.6 million of the 6.5 million people who will benefit from checks of $400 to $600 from the Legault government.
And even this group will receive about three quarters of the 3,500 million dollars that the Quebec government will allocate to it.
In short, most of the funds of the measure, more specifically 2,800 million, will go to people with low or modest incomes. Therefore, the measure is not unjustified or electioneering for most of the funds paid.
Now there are the other taxpayers who are going to receive checks, usually for $400, those who earn between $50,000 and $104,000. Therefore, Quebec will pay them a little more than 700 million dollars in total.
Electoralist, this portion? Yes, definitely. Legault’s government wanted to curry favor with the middle class and it succeeded. Especially since he had already sent checks, for $500, last spring.
Not very useful, the new checks? Probably for those earning more than $70,000, in my opinion, especially couples with two incomes within those parameters. But very useful, on the other hand, for families with a single income of $70,000 and four mouths to feed.
What seems clear is that the amounts that will be paid to taxpayers who earn between $70,000 and $104,000 could have been used for other purposes, in education, health or debt payment, for example. The catch is that the checks for this group of roughly 750,000 taxpayers will total just $300 million… less than 10% of the $3.5 billion.
Inflationists, checks? In fact, returning to taxpayers funds that can stimulate demand with their purchases, and therefore prices, is inflationary in nature and undermines the work of the Bank of Canada. Hence the importance of targeting the less fortunate.
But be careful, to avoid the inflationary effect, the government should not spend this excess money in another way, for example on education, health or road construction. Because public spending is practically as inflationary as the personal spending of taxpayers.
In short, in order not to be inflationary, the money must remain in the coffers of the State and be used to reduce the debt, essentially (or to eliminate the deficit, which is the same thing).
Finally, for those who are concerned about the finances of the Government of Quebec, know that the situation has improved a lot precisely because consumers have paid more sales tax, in particular due to the increase in prices. The checks, therefore, are not gifts, but the return of taxes and duties that taxpayers have also paid due to inflation, among other things.
However, $400 to $600 checks are an imperfect measure. It would have been preferable for the Legault government to modulate the checks according to the family situation, for example. And gradually reduce the $600 paid for an income of $50,000, an amount that could have dropped to $0 for an income of $70,000, for example.
Another element, forward-looking: If I were the Legault government, I would delay promised tax cuts to 2023, knowing that these payments contribute to inflation and hurt the Bank of Canada’s efforts (and the economy in the long run).
For example, why not announce in the March 2023 budget that the tax cuts will not start in January 2023, as planned, but in the fall of 2023, when, in all likelihood, inflation will have fallen significantly?
In my “Quebec Beats Predictions” column, published Wednesday, the table indicates that Quebec is at 7me range of provinces by GDP per capita ($47,778), but the text speaks of 5me range. It’s actually 7me range. My fault.