At the end of the 1970s, there was an economic downturn and a rise in unemployment rate because a second oil crisis appeared in Iran, who is the oil producer. As oil prices rise, factories need oil for transportation, so they also increased the prices of goods which caused inflation in Quebec. Some factories were relocated because they were attracted by the low labour costs in other countries, so they closed their businesses in Quebec, so many workers were laid off which made people’s purchasing power decrease as their wages rose less than the prices of the goods. This caused tax losses for the government because they need taxes to fund social programs, so Quebec and Ottawa must raise taxes which led to debts. I don’t understand how the governments raise taxes because weren’t people not able to pay taxes…? I need clarification to this part! :)) Thank you for helping me!
Secondary IV • 7mo.
Explanation from Alloprof
This Explanation was submitted by a member of the Alloprof team.
Hi!
People were still able to pay taxes, but less. The amount of money you pay in taxes depends on the money you make. So if you make less money, the government will take less of it. For example, (these numbers are not the actual numbers, they are just examples) if you make 30 000$ a year, your tax rate would be 10%, so the government would have 3000$ from your taxes. But if you have a higher income, like 100 000$, your tax rate could be of 20%. So that means the government would collect 20 000$ from your taxes. If everyone starts making less money or worse, no money, then the government's revenue would drastically go down, which explains why the taxes were raised.
I hope this helped! If you have more questions to ask, don't hesitate. We'll be happy to help you! :D
Laurie :)