Whether it's economic growth, job creation, the unemployment rate, or investment growth, Quebec has generally lagged other Canadian provinces and even American States. There are many reasons for the province's relatively weak performance but shaky government finances in the form of high debt levels and an uncompetitive tax system are among the most important.

The Couillard government has been forthright about the need to address the province's fiscal challenges and has already taken some important initial steps to balance the budget in 2015/16. If things go as planned, Quebec will end a seven-year streak of consecutive deficits. The new government has also established two independent committees, one—the Ongoing Program Review Committee—to review the effectiveness and efficiency of existing programs and another—the Quebec Taxation Review Committee—to make recommendations to improve the provincial tax system.

However, given the extent of Quebec's debt and tax challenges, large, not marginal, changes are needed and the upcoming 2015 budget is an opportunity to enact bold reforms. This paper measures the extent of the fiscal problems facing the province. In particular, it highlights the dramatic level of government indebtedness and the province's uncompetitive tax system.

From 2004/25 to 2013/14, net debt has grown 83.0% from $99.0 billion to $181.3 billion. Quebec is by far the most in-debted province both as a share of GDP (50.0%) and per person ($22,230).  For every dollar of revenue collected by the Quebec government, more than 11 cents goes to paying interest on past government debt and not public services or tax relief.

While Quebec's tax system is generally uncompetitive, the personal income tax system is especially so. Provincial mar-ginal tax rates are amongst the highest in Canada at various income levels. Once the federal rate is included, a Quebecker earning $150,000 loses about 50 cents for every extra dollar earned to personal income taxes.

The government's latest fiscal plan does not include the fiscal room to take bold action. Reducing program spending and reforming how programs are delivered would free up the resources both to reduce government debt and enact tax changes while avoiding further budget deficits.