Quebec Plans Substantial Tax Cuts Starting In 2023

By Mika Takashi Mar 22, 2023

The Quebec government has proposed a tax cut in its 2023 budget, aimed at boosting economic growth and supporting the province’s recovery from the COVID-19 pandemic. The tax cut proposal has been met with both support and skepticism from experts and stakeholders.

The proposed tax cut would reduce the tax burden on Quebecers by $4 billion over the next five years. The cut would be phased in gradually, with $600 million in tax relief in 2023, followed by $1.3 billion in 2024, and the remaining $2.1 billion over the following three years.

The tax cut would be implemented in several ways. The first measure would be to reduce the tax rate on the first bracket of taxable income from 15% to 14%. This would benefit low and middle-income earners, who make up the majority of taxpayers in Quebec and likely have a substantially positive impact since Quebec has the highest taxes in the country.

The second measure would be to increase the basic personal amount, which is the amount of income that can be earned before taxes are owed. The basic personal amount would be increased by $500 in 2023, and then indexed to inflation in subsequent years. This would also benefit low and middle-income earners, as well as those on fixed incomes such as seniors.

The third measure would be to reduce the tax rate on small businesses, from 4% to 3.5%. This would benefit small business owners and entrepreneurs, who have been hit hard by the pandemic and are critical to the province’s economic recovery.

The Quebec government has stated that the tax cut would stimulate economic growth and job creation, as well as help attract new investment to the province. The government has also argued that the tax cut would make Quebec more competitive with other provinces and jurisdictions, and help retain and attract skilled workers.

However, some experts have raised concerns about the potential impact of the tax cut on Quebec’s fiscal sustainability. Quebec already has one of the highest tax burdens in North America, and the proposed tax cut would further reduce government revenue. Critics argue that the tax cut would make it more difficult for the government to fund essential services such as healthcare and education, and could lead to future budget deficits.

Furthermore, some experts argue that the tax cut would not necessarily lead to increased economic growth and job creation. They point to research that suggests that tax cuts may not be as effective at stimulating economic activity as other measures, such as infrastructure investments or targeted support for specific industries.

There are also concerns about the distributional impact of the tax cut. While the proposed measures would benefit low and middle-income earners, they would also benefit higher-income earners who would see a reduction in their tax burden. Some critics argue that this could exacerbate income inequality and undermine efforts to address poverty and social exclusion.

Despite these concerns, many stakeholders have expressed support for the tax cut proposal. Business groups and small business owners have welcomed the reduction in the tax rate on small businesses, arguing that it will help support entrepreneurship and job creation. Labor unions have also expressed support for the proposed increase in the basic personal amount, as it will benefit their members and other low-wage workers.

The proposed tax cut has also been praised by some economists and fiscal experts, who argue that it will stimulate economic activity and support the province’s recovery from the pandemic. They point to research that suggests that tax cuts can have a positive impact on consumer and business confidence, which can lead to increased investment and job creation.