OTTAWA—Prime Minister Stephen Harper is known as an excellent political campaigner. But, with an election in the air, he has set himself a real challenge: Can he convince individual taxpayers to continue paying a greater share of Ottawa’s income taxes while reducing the share picked up by corporate Canada?

Despite warnings that it could topple the minority Conservative government, Harper has not blinked in his determination to go ahead with a program of phased-in corporate income tax cuts that will cost Ottawa another $6 billion in foregone revenue next year.

In keeping with the government’s vision of making Canada a low-tax jurisdiction, the Conservatives have been gradually cutting taxes on corporate profits since 2007.

By 2015 under this plan, the share of federal government programs paid for by corporate income taxes will have shrunk to 12.3 per cent from 20.8 per cent in 2000.

Pollsters say selling corporate tax cuts to the public is an iffy proposition, particularly after years of work by Harper to position himself as a creature of Main Street, not Bay Street.

And the federal opposition parties are making every effort to capitalize on the tax issue, accusing the Conservatives of favouring big business over average families at a time when Canadians are still struggling to recover from the recession. Adding to the opposition’s anger is the fact Finance Minister Jim Flaherty is boosting payroll taxes paid by employees and employers.

“We are looking at a $56 billion deficit, yet Conservatives want to borrow another $6 billion just to give Canada’s wealthiest corporations a tax break they obviously do not need because tax rates are already low,” Liberal MP Justin Trudeau said Friday in the latest salvo from his party on this issue.

The government is defending its position by saying that not only large corporations benefit from lower income taxes.

“We are making Canada a magnet for jobs, for investment and for opportunity,” Conservative House leader John Baird responded to Trudeau.

Catherine Swift, the President of the Canadian Federation of Independent Business, appeared in Ottawa alongside Flaherty last week to make the point that businesses large and small welcome tax breaks, although she noted that her organization was not thrilled by the increase in Employment Insurance premiums that began Jan. 1.

In the past four years, the Harper government has been gradually reducing the corporate income tax rate from 22 per cent to 16.5 per cent as of Jan. 1. In 2012, it will fall to 15 per cent.

It’s part of an array of business tax reductions introduced by the Conservatives that will deprive Ottawa of an estimated $60 billion in tax revenue by 2013.

The Liberals and NDP say it doesn’t make sense to keep phasing in the tax cuts at a time when Ottawa’s finances are in turmoil and Canadian corporate income taxes have already been reduced to be in line with other industrial countries.

If in government, the Liberals say they would rescind the latest business tax cut, leaving the corporate income tax rate at 18 per cent. The $6 billion dollars in extra federal tax revenue would be dedicated to family care, education and pensions, Liberals say.

Harper and Flaherty argue that higher corporate income taxes would jeopardize the economic recovery and make it harder to bring down unemployment, which at 7.8 per cent is still considered unacceptably high by the Conservative government.

With all three opposition parties against more corporate tax breaks, it’s possible the issue could blow up after the federal budget in March, leading to the fall of the government on a Commons vote.

It’s not clear if Harper could succeed if more tax help for corporations becomes a major election issue, observers say.

Bob Plamondon, a well-known chronicler of Conservative politics, says Harper can argue that lower business taxes spur economic activity and actually increase corporate tax revenues.

But “that is a hard argument to make,” Plamondon admits.

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What’s going on, in his view, is that Harper, after five years in power, has reached a point where he is willing to risk large amounts of political capital for decisions the Prime Minister believes are in the best long-term interests of the country.

He said the same is true for Harper’s decision to engage the United States in a new, more coordinated approach to border security and for Ottawa’s move to spend $18 billion on F-35 fighter aircraft.

After years of cautiously managing a minority government, Harper is becoming less cautious and accepting the need to make tough choices, Plamondon said. “They’ve got three issues where the political outcome is unknown,” he said, “so they are into new territory.”

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