Despite vehement opposition, Quebec Premier Jean Charest has proceeded with his risky plans to use federal funds to finance provincial income-tax cuts. Yesterday's 2007-08 provincial budget earmarks the extra $700-million in federal equalization payments that Quebec secured this year for tax breaks, a move that will trim up to $1,939 from a working family's tax bill. It is a misuse of federal money that is intended to let poorer provinces provide the same levels of service as richer provinces without drastically increasing their taxes. And it is certain to prompt taxpayers in other provinces to ask why they are paying for Mr. Charest's largesse.
Since the Liberal Premier first took office in 2003, he has complained about the so-called fiscal imbalance, arguing that he did not have enough money for social programs such as health and education. Ottawa, he said, had all the extra cash. In response, the federal Conservative government coughed up $2.2-billion in additional transfer payments for Quebec in its 2007-08 budget. The extra money was seen as a buttress for Mr. Charest's government, which was then in the midst of a tough election campaign. The Premier promptly promised to add the extra equalization funds - $700-million of that $2.2-billion - to the $250-million he had already promised in tax cuts.
Few agreed with him, then or now, as he struggles to keep his minority government in power. Both opposition parties have denounced the cuts, saying Quebec should use the equalization money to tackle its debt, which is the highest among the provinces, and spend more on hospitals and schools. Mr. Charest has ignored them, perhaps to his government's peril. His balanced budget puts two-thirds of the extra federal cash into health and education, but he will spend the rest on tax cuts, largely for the middle class. Quebec Finance Minister Monique Jérôme-Forget cheerfully argued that working people "are entitled to a reprieve."
At what price? Ontario does not receive equalization, although its taxpayers provide more than 40 per cent of the program's funds. It could not afford income-tax cuts this year. Quebec has avoided the tough fiscal choices other provinces have been forced to make. It has maintained artificially low fees for child care and postsecondary tuition, and now it is effectively forcing taxpayers in other provinces to pay for its tax cuts. Mr. Charest has mocked those taxpayers with his previous pleas of poverty.
Charest's tax breaks
And it is certain to prompt taxpayers in other provinces to ask why they are paying for Mr. Charest's largesse.