Flaherty sees no problem with Quebec Liberal tax cuts

There's nothing in the Canadian Constitution to stop Quebec Premier Jean Charest from using equalization money for tax cuts, the federal finance minister says.

Jim Flaherty told Quebec's largest employers' group,the Conseil du patronat,that he is OK with the province funding tax cutswith transfer payments outlined in the federal budget adopted by the House of Commons Tuesday.

Liberal Premier Charest announced the $700 million in tax cuts last week in a late effort to woo voters during the final leg of the Quebec election campaign.

Flaherty admitted several provinces resented Charest's ploy but he said the Quebec Liberal leader is not breaking any rules.

"The equalization provision in the Canadian Constitution said the goal is reasonable, comparable services in all areas of the country, at reasonably comparable levels of taxation.

"For Premier Charest to have used some equalization money to reduce taxes, which are higher in Quebec, is within the Constitution," he said during the breakfast meeting in Montreal on Wednesday.

"That's his decision and it would be the decision of any other premier."

Quebec's tax cuts won't hurt the concept of open federalism, Flaherty added. He said he's always happy when governments reduce taxes, but hinted it's sensitive to introduce cuts during election campaigns.

The Conservative government continues to deny it timed its budget, and its generous offerings to la belle province, to coincide with the Quebec election campaign.

"The budget would have been tabled regardless of the election," said Montreal cabinet minister Michael Fortier.

Charest took considerable heat from the Action Dmocratique du Qubec and Parti Qubcois leaders when he announced the tax cuts the day after the federal budget was tabled.

The tax cuts look less certain now that the Liberal premier is leading a minority government thanks to Monday's Quebec election.

The ADQ, with its 41 seats at the national assembly, now holds the balance of power in Quebec. Leader Mario Dumont has said he does not support the tax cuts and would rather the money were used to pay down Quebec's debt.