Like so much of the rest of the developed world, Quebec has been going through a budget crisis recently. The supposedly left-wing government has threatened draconian cuts to health research, unemployment benefits, and a host of other popular programs. There never seems to be enough in the coffers.
Like much of Europe, Quebec has an extensive social welfare state. Free health care. $7/day subsidized public day care. A parental leave program that gives parents 1 year of paid leave (~60% of salary) per child. Incredible benefits to save for a child’s education. Heavily subsidized higher education. Generous unemployment benefits and an employment insurance program. Etc.
So why is a left-wing government cutting such things? That’s a subject for another post, but it’s clear that the cuts are politically unpopular, and that there is therefore some budget reality apparent to those in power that is not apparent to the average citizen. These are not the sort of folks likely to buy into all the austerity hype that was so popular elsewhere until recently.
The cuts proposed are not just unpopular, they are for the most part very bad ideas. For example, the government originally proposed cutting $10 million from medical research, or 30% of a $33 million budget. But research is a long-term investment – cutting so drastically would have stopped many projects in progress and made Quebec a much less attractive place for foreign researchers (like me) to come to. It’s like trying to save fuel by cutting the gas to an airplane engine in mid-flight… (The government eventually pulled back, under pressure.)
More importantly, what can the government do to solve the budget problem? The answer here is surprisingly simple: stop giving me money! Amidst all these budget crises in the news, my wife and I recently received a series of checks for about $800 from the Quebec government as child assistance payments, because we have a new son. The leaflet explained that everyone with a child gets such a payment, and that they are between $651 (for richer people) and $2319 (for poorer people) per year. And it’s tax-free.
I think child assistance payments are a great idea. They can (maybe) encourage people to have more children, which is good in developed countries with low birth rates. They also help defray the costs of raising a child and show a societal solidarity with families. I just don’t think child assistance payments for my family are a good investment of the government’s money.
My wife and I are both professionals with comfortable salaries. Our decision to have a child or not (or to have more children or not) is not affected in the smallest way by receiving $800 from the government. Maybe we’ll use it to get an even fancier stroller. Is this really what Quebec taxpayers should be paying for?
Of course, I’m not just talking about my family. I’m talking about all the families like mine. Anyone with a family income over $80,000 has absolutely zero need of government assistance to raise their kids, and the government gets very little benefit from payments to these families. As I’ve argued elsewhere, $1 is worth much more to a poor person than to a rich person; following this principle, the $800 we’ve received could do a lot more good helping a poor family, or reinvested elsewhere in the budget.
More generally, my wife and I make too much money and are taxed too little. The Quebec tax brackets are 16% up to ~$40,000, then 20% up to about $80,000, then 24% after that. This is on top of federal taxes of 15-29% depending on income. This all seems high compared to the US, especially with 13.5% sales tax, and it is. But the social benefits here are incredible, and worth it. I don’t have to pay for health insurance, and I don’t have to worry about not having health care, to name just the most prominent.
Our current salaries – modest compared to doctors, lawyers, business people, and many other professsionals – nonetheless give us an excellent quality of life. All we could want in a home. Plenty to save for retirement or a rainy day. Plenty to eat well. Plenty to travel to see family abroad, or to vacation overseas. Whatever stresses we may have in life, money is not one of them. Of course we could always find a way to use more, but our quality of life would be essentially untouched if we gave $10,000 more per year to the government in taxes. Instead, the government is sending us checks.
So, my proposal to fix Quebec’s budgets: stop all child assistance payments to the richest 30% of families, and similarly cut back drastically on other benefits for the rich and upper middle class. Less retirement benefits, less pay during parental leave, less unemployment insurance benefits. All of these things could be capped at the amount that would be received by a family with an $80,000 income, for example. And then raise our taxes.
I don’t argue this because I feel we have to always soak the rich. I argue this because this extra money could be used so much better to strengthen great government programs. It’s not just a question of giving money to the poor (though I’d be all for increasing the child assistance payments to the poorest families); it’s a question of smart investment in society. Medical research is the example I know best, of course. Funding medical research attracts educated, foreign professionals like myself. We then set up shop here, and we hire people to work in our labs using money we obtain from research grants. At any given moment, I am supporting about 5-8 students or employees in my lab, and I’m young and just getting started. These people will then go out and spend their salaries, and there is a multiplier effect. And we generate the results of the research, which is (we hope) of great use to society. Some discoveries by researchers like me become patented and create business opportunities, creating more jobs.
So, Quebec can tax me more and hire more people like me, or it can let me keep my money and put it into a savings account, or (if I were a completely different person) buy an Audi, a pool, and a vacation home in Miami. Most of the things a rich person could do with extra money have relatively modest benefits for the Quebec economy; not so for money invested in society, or given to those with modest incomes.
No, I’m not about to donate my extra salary to the government. But it seems silly to talk of a budget crisis when the simple solution is to cut government support to the better off, and to tax them more heavily. This doesn’t have to be exorbitant – there is probably some truth to the idea that higher taxes can slow growth – but a moderate hike could go a long way.