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It’s budget season, and next month’s federal budget (whenever that might be) will be the focus of attention. But the budget being presented this Thursday in Quebec City looks to be more interesting and may even serve as a template for other Canadian governments in the near and medium term.

Quebec’s public finances are at a turning point, largely because of population aging. The “prime” working-age cohort of those between 25 and 54 is in absolute decline and has now fallen more than 1% since its peak more than four years ago; the broader 15-64 group started declining last year. Although the effects of the recession still linger, population aging is now the leading explanation for sluggish government revenue growth. If there are fewer people of working age, then fewer people are paying income taxes, even as pressures on spending continue to mount.

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Successive Quebec governments have tried to generate more revenues in order to close the deficit. The Quebec Sales Tax was increased by two percentage points, thus offsetting the Conservative government’s two-point reduction in the GST. Income tax rates for high earners were increased, a “health tax” was introduced and the gasoline tax increased by one cent per litre in four consecutive years. These measures increased revenues by about 1.5% of Quebec GDP, but still not enough to bring the government’s budget into balance. Unsurprisingly, public opinion polls suggest that tax fatigue has set in.