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Politics New poll shows Canadian priorities are on deficits, business taxes ahead of Morneau’s fall update

Bill Morneau announced Thursday that he will release his fall economic update on Nov. 21 and the results of a new Nanos survey for The Globe and Mail show what Canadians want the Finance Minister to deliver.

The survey found that a majority of Canadians say balancing the federal budget is more important than investing in government programs. It also found that most Canadians would like business tax rates to be the same or higher than the United States, with only 14-per-cent support for having lower business taxes than the United States.

Mr. Morneau’s update is expected to announce Ottawa’s direction on the deficit and business taxes in the run-up to the October, 2019, federal election.

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The Finance Department recently revealed that the federal deficit came in at $19-billion for the fiscal year that ended March 31, which was virtually unchanged from the previous year.

“Canada is a place where people want to make investments. We need to ensure that remains the case,” Mr. Morneau told reporters after announcing the date of his fall update. “We’ll take into account the competitive environment and that includes looking at President [Donald] Trump’s initiatives in the United States. We’ll also make sure that what we do is prudent and considers the Canadian situation.”

The Liberal Party campaigned in 2015 on a pledge to run short-term deficits of no more than $10-billion a year to pay for new spending in areas such as infrastructure and family benefits before balancing the books by 2019. However, in government, Liberal deficits have repeatedly exceeded that cap and Mr. Morneau no longer has a timeline for fiscal balance.

Pollster Nik Nanos said the results suggest that the deficit message that worked for the Liberals in 2015 is unlikely to work again in 2019.

“They should take heed of the fact that for most Canadians, they were accepting of [deficits] as a temporary measure. They did not see it as a long-term sustainable strategy for Canada,” he said.

The hybrid phone and online survey of 1,000 Canadians asked whether it was more important to balance the federal government budget to eliminate the deficit or run a deficit and invest in government programs. The margin of error for such a survey is plus or minus 3.1 percentage points, 19 times out of 20.

Running a deficit to invest in government programs – which is the current position of the federal Liberal government – had the support of 33 per cent of respondents. Balancing the budget had 58-per-cent support. A further 9 per cent said they were unsure.

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The survey answers in response to taxation, meanwhile, suggest Mr. Morneau’s position on that issue is generally more in line with public opinion.

Respondents were asked about the recent decision to lower corporate and personal taxes in the United States. Business groups in Canada say the federal government should respond by cutting taxes so that the Canadian economy remains competitive, while critics of such proposals say cutting taxes would mean less federal revenue for government services.

On business tax rates, 47 per cent said Canada should have rates that are about the same as the United States, 28 per cent said business tax rates should be higher than the United States, 14 per cent said they should be lower and 11 per cent were unsure.

On personal tax rates, 36 per cent said Canada should have higher personal tax rates than the United States, 33 per cent said Canada should have rates that are about the same as the United States, 20 per cent said Canada should have lower rates than the United States and 12 per cent said they were unsure.

Analysts have said that the recent U.S. tax cuts have erased Canada’s corporate tax advantage over the U.S. Business taxes in Canada are now slightly higher. Personal tax comparisons vary widely by income level, state and province. Canada’s business community has expressed concern that tax rates for top income earners are generally much higher in Canada, which can create a competitive disadvantage for Canadian firms in their efforts to attract talented workers.

Mr. Morneau has been cool to the idea of lowering corporate or personal tax rates, but has signalled an openness to considering targeted tax breaks for business that would encourage investment in capital costs.

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“There’s actually not a lot of appetite for having lower tax rates than the United States. So if the government has a particular narrative that says that we’re in the same range as the U.S., that’s more likely to be acceptable than having a lower or higher [rate],” Mr. Nanos said. "I think for a lot of Canadians who are not tax experts, their initial default is we don’t need to do a steep discount to have a significant advantage, but we don’t want to create a disadvantage in our tax regime.”

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