Saturday, April 3, 2010

Quebec’s Budget and consumption: Minister Bachand’s miscalculation

Further to my radio column of Thursday, April 1 on the same subject, here are a few thoughts.

Minister Bachand deludes himself thinking that an increase of QST and the gas tax will bring more money into the coffers of the state; it’s a mistake governments often make.

In reality, many consumers already have a very tight budget; unable to pay the excess expenditure of hundreds of dollars per year incurred by these tax increases, they will adopt tactics to lower their expenses: 1. Reducing the purchase of certain goods and services; 2. Buying outside Quebec; 3. Purchasing goods and services on the black market to avoid paying taxes.

I do not advocate the use of these tactics, some of which are illegal; I only report what happens every time the government unduly increases the tax burden, especially in Quebec where the citizen is already the most taxed in North America. Ultimately, you can safely bet that Quebec will see its fiscal revenues decline.

Furthermore, the economic crisis has been severe and the recovery is still fragile; in fact, there is virtually no job creation. All these tax and tariffs increases will likely nip recovery in the bud.

The solution to Quebec’s deficit does not lie in increased state revenues but in a substantial reduction of the bill incurred for social programs, which amounts to 16 billion dollars more than the neighboring province, Ontario. We can no longer afford these privileges. For example, the $7 a day child care program alone, whose real cost is $45, represents an expenditure of over $2 billion for Quebec. Sheer nonsense!

For this program, I propose that access to child care be free for the poorest people, such as single mothers with incomes nearing poverty; others should pay the actual cost of the service. In any case, it really benefits only the richest.

Besides, if states want to increase their income, they can easily impose a surtax on speculative gains, but this requires concerted international action. Will our leaders have the political courage to confront the sometimes shady world of financiers and speculators?