Eric Girard tables an economic update that includes the indexing of welfare payments and the tax system along with an increase in the age of eligibility for a senior career-extension tax credit from 60 to 65.
QUEBEC — Insisting the current deterioration in public finances is temporary, Finance Minister Eric Girard tabled an economic update Thursday that indexes the income tax and social assistance benefits to the advantage of Quebecers.
But the big review of government tax credits has started with senior Quebecers still working taking a hit. Quebec is increasing the age of eligibility for a tax credit for workers aged 60 to 65 who keep working, a decision which will save Quebec a total of $877 million in spending over five years but cost about 200,000 Quebecers about $1,000 a year.
He has nevertheless included a rainy day reserve fund in his budget plans. There is $750 million for 2024 and $1.5 billion for 2025-2026 that could be used “to limit the effects of more moderate income growth than anticipated, should this occur.”
He maintained that Quebec’s commitment to return to a balanced budget by 2029-2030 is intact, with plans to table a five-year plan to how to get there in the March 2025 budget.
Quebec has also undertaken a review of all of its tax system including the 277 tax credits it offers a host of organizations and causes. They have a total worth of $49 billion in 2023. Girard said he wants to “align the tax system with Quebec’s current realities.”
He revises his March revenue projection upward by $1.3 billion, largely owing to increases in federal transfers ($1.6 billion more) and a bump sparked by his decision to harmonize Quebec’s capital gains tax system with Ottawa’s plan.
Overall, total government spending for 2024-2025 is up 6 per cent, allowing Girard to defect, for now, accusations that Quebec is headed down the path of austerity.
“The economic recovery is beginning in Quebec,” Girard said, presenting his update. “Today we are continuing our targeted action by focusing on Quebec’s priority issues. The review of tax expenditures will help us prepare for the return to budgetary balance in a gradual and responsible manner.”
Yet he adds the “geopolitical context is still fraught with uncertainty,” which requires the government to “exercise rigour” to ensure the sound management of public finances.
Girard instead returns to the update formula he has used in the past: indexing. He announced a 2.85-per-cent indexing of personal income taxes and social assistance benefits to protect the purchasing power of Quebecers faced with the ravages of inflation.
Overall, the indexation translates into tax relief for 5 million Quebec households of $5.2 billion over five years.
As of Jan. 1, 2025, the basic annual social assistance benefit for a recipient will rise from $9,144 a year to $9,408, an increase of $264.
Family allowance payments will go up from $2,923 a year to $3,006 a year, an increase of $83.
Rate increases for government services are again capped for 2025 at 2.85 per cent. Those rates had been indexed in 2023 and 2024 at four per cent.
The bad news, however, for seniors is that Girard is revising the tax credit eligibility age for extending their careers from 60 to 65.
But circumstances also force Girard’s hand. He has included an additional $250 million to assist the victims of post-tropical storm Debby and rebuild infrastructure.
There is also $252 million in increased support for the forestry sector plus $208 million to promote access to housing. On top of funds announced last year, Quebec is injecting an additional $880 million into its five-year public transit assistance plan for cash-hungry transit companies.
There was no hint in the document of what budgetary restrictions might be looming in the future, but there are restrictions already underway that Quebec says are necessary to respect the plans of the 2023-2034 budget.
This report will be updated.
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