September 15, 2016 2 min to read

Is it fair Taxpayers from Québec pay 16.5% less federal income tax?

Category : Attacks on Québec, Differences

To be honest, put like that, it’s true that it doesn’t appear fair for Québec taxpayers (and only for Québec taxpayers) to get a 16.5% reduction in their Federal income tax.

This program is called the Quebec Abatement and the few people outside of Québec who hear about it are generally outraged that Quebec doesn’t appear to pay its fair share of the federal income tax.

After all, a 16.5% federal income tax is a big deal!

Here is a simple comparison: if you make $60,000 in 2016, you will owe the federal government $8088 in income tax if you live outside of Québec, but only $6754 if you live in Québec. That’s a $1334 saving just for living in Québec!

Before you bring out the pitchforks let me explain why: During the 1960s, the federal government decided to basically offer new federal-provincial programs in certain areas reserved for provincial governments in the constitution. This notably includes social welfare and some education health initiatives.

Because these programs are managed by provinces, the federal government offered to each province to either let the federal government manage and finance these programs or to opt-out and receive the money that the federal would have spent otherwise.

Only Québec decided to opt-out.

It was thus decided that 13.5% of all income tax levied by the federal government from Québec taxpayers would instead be given to the Québec government. Later, another program, the Youth Allowances

In 1964 the federal government created a new program, the Youth Allowance program which Québec was already offering since 1961, so the abatement includes a further 3% to finance the Québec program since education is a provincial matter over which each province (not just Québec) has exclusive right to spend money.

But why a rebate on income tax?

Québec is the only province where taxpayer fill not one, but two tax forms (with different deductions, rules, and procedures). As a result, the Canada Revenue Agency doesn’t send any money from taxpayers to the government of Québec, instead, Québec rose it’s provincial income tax to retrieve the abatement from its taxpayers.

In other words, if you make $60,000 in 2016 in Québec, you will not save $1334, but instead, you will pay that $1334 on top of your provincial income tax!

Of course, it’s not that clearly labeled, and it’s possible that you will be eligible to certain Québec only deductions that will reduce that amount or not eligible for some Federal only deductions which might increase that amount.

But the thing to keep in mind is that the Québec abatement is not a rebate Québec taxpayers get, but rather, we simply pay that amount to the Québec government directly instead of thru the federal government.

It’s possible that your own province could negotiate income tax point transfers like Quebec did, but since you pay your provincial income tax on the same form as your federal income tax, you wouldn’t see the difference: the federal would simply give part of your federal income tax to your own province and you would still make a single check if you owe them money.

In Québec, it’s our own job to transfer that money each year by paying directly the Québec government out of our own pockets.

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