Charest has not kept election promises on tax cuts

And his Liberal government has failed to reduce civil service by much

Québec 2007 - Parti libéral du Québec

Jean Charest marks the fourth anniversary of his election as premier in April 2007 and, with rumours of a fall election, Quebecers must be wondering: "Has the Quebec Liberal government kept its promises made before and after the election?"
Those promises came in two main papers: an Action Plan for the Next Liberal Government, which was adopted by a Quebec Liberal Party congress six months before the election and formed the base of the party's election platform, and a Modernization Plan published by the government a year after the election.
Let's look at the promises and the reality:
Taxes and public finances. Taxes were the area where the 2002 Action Plan was most explicit: "Beginning with the very first budget it tables, a Quebec Liberal Party government will launch a plan to reduce personal-income taxes by $1 billion annually over a five-year period."
This promise has not been kept. The Liberal government's first budget, introduced on June 12, 2003, contained no tax cuts. The next three budgets cumulatively reduced the tax burden by about $626 million (at the end of the 2006-2007 fiscal year). This, compared to the $3 billion required to meet the pledge in the Action Plan (if one leaves out the first budget), amounts to about one-fifth of the promised objective.
The only reductions in the last four years come not from a decrease in taxation rates but from the effects of simplifying the tax regime (merging the general tax regime and the so-called simplified one, starting Jan. 1, 2005) and from introducing a $500 deduction for workers (rising to $1,000 on Jan. 1, 2007).
In its official documents, the government inflates personal income-tax cuts by adding refundable tax credits and amounts resulting from the indexing of tax brackets. The tax credits, related mainly to the new child-support and work-premium programs, consist of subsidies to families and low-income wage earners. They are distributed even to people who pay little or no tax (this is what "refundable" means). It is, thus, misleading to refer to them as tax cuts. As for the indexing that existed in the tax system before the current government was elected, it merely prevents real taxes from rising with inflation, and it is obviously incorrect to regard this absence of an increase as tax relief.
In terms of expenses, real per- capita program spending under the Charest government continued rising. Since 2003-2004, per-capita spending has gone from $6,445 to $6,651 by the end of the current fiscal year. It is true that the ratio of program spending to GDP fell from 18.1 per cent to 17.7 per cent between 2002-2003 and 2005-2006 (with a forecast of 17.6 per cent for 2006-2007). However, this reduction is due solely to the rise in GDP (with real spending up); the two preceding Parti Quebecois governments presided over an even greater reduction in the ratio, which stood at 21.3 per cent in 1994-1995 and 18.9 per cent in 1998-1999.
In fact, and even excluding the losses of the Societe generale de financement, two of the last four years have been marked by slight deficits. In addition, because of capital spending, the public-sector debt has kept on rising since March 31, 2003. The debt has, nevertheless, fallen as a proportion of GDP (from 74 per cent to 67 per cent in the last three years) and the main credit rating agencies have raised the government's rating.
Re-engineering the state. The Quebec Liberal Party promised to lighten the load of government (including abolition of certain bodies) and to reassess some programs.
The government specifically pledged to replace only one civil servant out of two as they retired. Indeed, the number of civil servants, after peaking at 75,800 in 2003-2004, has fallen by 2,500 (in full-time equivalency) since then, with the goal being a 20-per-cent reduction over 10 years.
In terms of government bodies themselves, 16 were officially abolished by the Charest government. However, in about half the instances, their responsibilities of were transferred elsewhere in the government apparatus. Moreover, since other entities were created to administer new programs, the effect has been even more modest. On June 6, 2006, the government website listed more than 200 agencies, boards and commissions. Abolishing about 20 more of these is still planned, with the list including the national asbestos corporation and the racehorse corporation.
The Quebec Liberal Party had not promised a drastic reduction in the role and size of government even though certain left-wing opponents accused it of seeking to dismantle the Quebec state. It did, however, promise to cut taxes and lighten the weight of government. Even by this yardstick, it must be concluded from this summary that the results have been modest and ambiguous at best.
Tasha Kheiriddin is executive vice-president of the Montreal Economic Institute. The article is a shorter version of an MEI report card on the Charest government, released today.

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