2000-2001 Budget / Budget Speech |
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II. A $4.5-billion personal income tax reduction
(a) An immediate reduction of $1 billion
We are using the benefits we have reaped first of all to reduce substantially the personal tax burden. Québec taxpayers bear a heavy load. Relief is long overdue.
The government will therefore cut personal income tax by $1 billion for fiscal 2000-2001, by $1.5 billion for 2001-2002 and by $2 billion for
2002-2003. This reduction will actually be retroactive, as I mentioned earlier, to January 2000.
I wanted this reduction to appear on taxpayers' paycheques as soon as possible. As early as May, Quebecers will see a substantial drop in income tax. I know that, when they look at their cheque and reflect on Québec's sound finances, our reinvestments in health care, education and the economy, our fellow citizens will realize that they are well governed and that the results were worth the effort.
(b) A fully indexed tax system
Our government has also decided to protect taxpayers' purchasing power from inflation. Beginning today, this protection is more than ensured for 2000, 2001 and 2002, thanks to tax cuts many times higher than the impact of price increases. Beginning in the 2003 taxation year, full automatic indexation will be implemented.
The reduction in personal taxation we are implementing will result in a total tax cut of $4.5 billion over the next three fiscal years. This is not only an improvement on our electoral promise to cut personal income tax by $3.2 billion by the end of our mandate, but also an improvement on the Official Opposition's request for tax cuts of $5 billion over five years. We are far ahead of this timetable and I am sure the Official Opposition will congratulate us warmly for it!
(c) Details of the personal income tax reduction
Now for the details of the tax reduction:
- First of all, we will bring in a new tax table. By January 1, 2002, the three tax rates, now at 20%, 23% and 26%, will be progressively reduced to 17%, 22% and 24%.
- Secondly, I am announcing an improvement in the assistance measure for families, incorporated into the Québec taxation system.
- Thirdly, as I have already said, the government will protect taxpayers' purchasing power permanently through the combined effects of the tax reduction and the automatic indexation to come into effect beginning in 2003.
In addition to these three main changes, I am announcing an improvement in the tax credit for child care expenses available to families who cannot take advantage of $5 day care. This improvement will be of particular benefit to families earning between $27 000 and $75 000. It represents an additional tax reduction of $29 million. This measure serves to enhance yet further our excellent family policy, the envy of many a country--and coveted by the federal government.
To this we add $29 million in tax reductions to improve the tax system for self-employed workers who are becoming increasingly numerous in Québec. They must be given fair treatment under our tax system.
(d) A reduction geared to families and the middle class
Because of the criteria adopted, the tax relief will benefit all taxpayers whatever their income or personal situation. Everyone wins under this tax reform. Nobody loses. And, besides being immediate, it will have lasting effects, thanks to indexation.
On average, these measures will reduce income tax by 13%. The 2.4 million Québec households that pay income tax will see their tax burden drop significantly. Moreover, 130 000 additional households will no longer pay any income tax at all. From a social point of view, our taxation system will remain an exemplary one of which we can well be proud.
One particular message was repeated with insistence during the parliamentary committee last fall: special attention must be paid to families and the middle class. The message did not fall on deaf ears: all taxpayers will be winners, but middle-class taxpayers and families will be bigger winners than anyone else.
Let me illustrate the final impact of what I am announcing with a few examples.
- A technician with two children and one employment income of $45 000 will benefit from both the new tax table and the improved tax reduction for families. Her income tax will be reduced by 27% or $1 133.
Remember, too, that, until now, only families with an income below $51 000 have benefited from the tax reduction for families. From now on, all families with an income of less than $76 000 will be entitled to the tax reduction.
- An office employee married to, say, a cashier, with two children and a family income of $50 000 will benefit from a total tax reduction of $1 733, or 34%. In short, our tax cuts will be particularly advantageous for double-income families, which account for about 80% of Québec families.
- A family consisting of an engineer, her husband and two children, with a total income of $100 000 will have a tax cut of 11% or $1 803. The reduction measures therefore apply as well to higher incomes, but the decrease is proportionally less for the more affluent families.
- A dental hygienist living alone, with an income of $30 000 will enjoy a tax reduction of 16% or $673.
I am tabling an information document explaining the terms and conditions, and the impact, of these tax cuts, as well as the additional information on the budgetary measures, which are an integral part of the Budget Speech.
(e) Greater reductions than offered by the federal government
A few weeks ago, the federal Minister of Finance announced his own tax cuts. I had occasion to point out that I thought them rather skimpy, completely out of proportion to Ottawa's enormous leeway. I would like to add today that the federal cuts are much smaller than the ones I am announcing now.
Over the next three fiscal years, Ottawa's tax reductions will result in a $2.7-billion decrease in taxes in Québec. Our Budget is cutting taxes by $4.5 billion over the same period-almost double.
Let me now return to the examples I gave earlier. In 2002:
- Our technician, who is married and has two children, will pay $1 133 less in taxes to Québec and $440 less to Ottawa;
- For our office employee, who is married to a cashier and has two children, the discrepancy is much greater; they will be paying $1 733 less to Québec but only $134 less to Ottawa;
- The engineer and her working husband, who have two children, will pay $1 803 less in taxes to Québec and $981 less to Ottawa;
- And the dental hygienist will pay $673 less to Québec and a bare $163 less to Ottawa.
In all these cases, our tax cuts are much greater and apply much more rapidly. The large gaps observed in certain situations clearly demonstrate the priority we have given to average income earners and families. For example, following the tax reductions announced by Québec and Ottawa, a couple with two children and two employment incomes will start paying tax at an income of $14 948 for the federal government and only as of $34 846 for Québec. The difference in philosophy is obvious.
In a context where the real financial and fiscal leeway is in Ottawa, these results speak volumes. Above all, they must bring us to reflect on what our national government could do if it had complete control over all taxes. Our former premier, Daniel Johnson Sr., called for such control with insistence, demanding, it will be remembered, that 100% be brought home to Québec: 100, 100, 100, as he said.