Shortly before unveiling the provincial budget in March, Quebec Finance Minister Raymond Bachand told reporters that "the average family pays enough taxes in Quebec." We couldn’t agree more. This year Quebecers have to wait until June 17 (nearly six months) to celebrate Tax Freedom Day. That is, if the average family in Quebec had to pay all the taxes it owed to all levels of government in advance, they would have to hand-over every single dollar they earned up to June 17—Tax Freedom Day.
In 2012, the average Quebec family consisting of two or more people will pay a total of $37,516 in taxes. Their total tax bill includes a wide array of taxes ranging from visible ones like income taxes, sales taxes, and property taxes to hidden taxes like gas taxes, alcohol taxes, profit taxes…and the list goes on. Together these taxes represent a significant burden that amounts to 45.7 per cent of the average family’s income.
Tax Freedom Day arrives four days later in 2012 than last year, meaning the average family has to work four additional days to pay its total tax bill. And higher taxes are partly to blame. The most significant tax increase this year is to the Quebec Sales Tax (QST) rate, which jumped yet again; this time to 9.5 per cent from 8.5 per cent. Because of the QST rate hike alone, Quebec families will pay an additional $491 in sales taxes this year.
That is not a trivial amount of money. To understand the significance of increasing the QST and the impact on the average family’s total tax bill, consider that Tax Freedom Day would have arrived two days earlier this year (on June 15) had the government kept the QST at last year’s rate of 8.5 per cent.
Aside from hiking the QST, the Quebec government also increased other taxes including gas and mining taxes as well as contributions to the Health Services Fund.
Quebecers not only experience a later Tax Freedom Day this year, but their Tax Freedom Day is among the last to arrive in Canada. Only Newfoundlanders wait longer with their Tax Freedom Day arriving on June 21. For comparison, Quebecers wait a full week longer than neighboring Ontarians and six days longer than the average Canadian family.
If that’s not troubling enough, Tax Freedom Day would take even longer to arrive in Quebec if, instead of running deficits, the provincial and federal governments covered their current spending with even greater tax increases.
This year Quebec expects a deficit of $1.5 billion while Ottawa anticipates a deficit of $21.1 billion. If the shortfalls were financed with additional taxes rather than borrowed money, Quebec families would see Tax Freedom Day arrive six days later, on June 23.
The "Balanced Budget Tax Freedom Day" is only a hypothetical scenario, but the reality is that government deficits will eventually have to be paid for by taxes. In this regard, the recent run up of government debt (which includes accumulated deficits) by both Quebec and the federal government is concerning. For instance, in less than a decade Quebec’s provincial net debt has increased from $99.0 billion in 2004/05 (or 37.7 per cent of GDP) to $178.5 billion in 2012/13 (51.5 per cent of GDP). Because of the increased debt, Tax Freedom Day could come later in the future.
If Minister Bachand truly believes the average Quebec family pays enough taxes, why is he increasing the burden with additional taxes today and, given his government’s budget deficits, likely more tax increases in the future?