Such a decision would certainly have dramatic consequences for our economy.
Yet an equally alarming issue is flying under the radar: our level of taxation. In his first term, Trump cut taxes for almost all Americans. He pledged to do so again while on the campaign trail. You don’t change a recipe that works, as the saying goes.
On our side of the border, the same cannot be said. Our tax rates, already uncompetitive, risk appearing even higher if the United States lowers its taxes again. Let’s take a concrete example: a worker with a gross income of $75,000 per year. In Quebec, this person pays approximately 39.5% of their income in taxes. Of the 61 North American jurisdictions, Quebecers are clearly the most taxed. Across the border in neighboring Pennsylvania the rate is 25%. Even in California, one of the highest-taxed states, the rate only rises to 30%.
But it’s not just a question of income tax.
In the United States, sales taxes and electricity costs are generally lower, not to mention the absence of a carbon tax as costly as in Canada.
If Quebec performs better for its energy costs and its carbon tax (SPEDE) is less expensive than that implemented by Ottawa, the list of advantages ends there. For higher incomes, the gap is even more striking. A Quebecer who earns $150,000 has 53.3% of his salary confiscated by the provincial and federal governments. Compare that to Pennsylvania: 27%. Even in California, we remain at 33.3%.
What about Texas? A taxpayer pocketing $150,000 per year only pays 24% in taxes. Yes, you read that correctly. A Texan with such an income pays less taxes than a Quebecer who makes… half!
As Trump plans further tax cuts, the tax gap between Canada and the United States could widen.
-However, neither Justin Trudeau nor the Prime Minister of Quebec, François Legault, seem in a hurry to put some money in the pockets of taxpayers.
If François Legault has repeatedly reiterated his intention to reduce the burden on taxpayers, he nevertheless affirmed when tabling the 2024-2025 budget that this was conditional on his re-election. But Quebec cannot wait for the next elections to become more competitive. It must become one now. During the 2022 elections, Legault committed to reducing taxes by 2.5% for the first two tax brackets, a measure planned to be implemented gradually over a period of 10 years. The first 1% tax cut has been effective since July 1, 2023 and allows a Quebec taxpayer to save up to $814 in taxes.
This reduction is well appreciated, but the fact remains that the rest of these tax cuts are crucial, both for taxpayers’ wallets and for the competitiveness of our economy. As for Ottawa, there is also room for significant tax cuts. A significant portion of the tax burden comes from the federal government. Trudeau could reduce personal taxes by 20% without widening the deficit, simply by cutting subsidies to businesses. In 2021, the federal government spent $47 billion on business aid. Imagine what this money could represent for Canadian families if we redistributed it.
We can’t control Trump’s decisions when he returns to the Oval Office.
But we can make our tax framework more competitive, both in Ottawa and in Quebec.
If we want to curb the exodus of wages and capital to our neighbors to the South, our government must wake up and reduce the tax burden on all taxpayers.
Nicolas Gagnon, Quebec Director of the Canadian Taxpayers Federation
