WASHINGTON – House Speaker John Boehner has proposed raising tax rates on people making more than $1 million, a source familiar with the talks told Fox News, in a development that could signal at least some movement toward a deal with President Obama.
According to the source, the latest offer is not being rejected, but there are still issues remaining and there is a serious effort to work out the difference.
At issue are expiring Bush-era tax cuts that would automatically vanish on Jan. 1 for virtually every income tax payer if Congress and the president don't act. Steep budget cuts are also scheduled to kick in, unless Congress and Obama agree to forestall them with other deficit reduction measures.
Some have warned the economy's nascent recovery would be reversed by the fiscal cliff. Federal Reserve Chairman Ben Bernanke said this week that the economy has already been affected by the uncertainty, and also warned that the Fed would not be able to offset the impact of the fiscal cliff.
Until now, Boehner had maintained his opposition to raising any rates. Instead, he had proposed to raise up to $800 billion in tax revenue over 10 years by limiting tax loopholes and deductions as part of a broad tax overhaul.
But the speaker and House Republicans have come under increasing pressure form a number of Senate Republicans who say they should yield to Obama's demand on tax rates for the wealthy and then press him for additional cuts early next year in exchange for an increase in the federal borrowing limit.
As part of a broader budget deal, Boehner is still seeking more spending cuts than Obama has proposed, particularly in mandatory health care spending. Boehner has asked for a long-term increase in eligibility age for Medicare, the federal health care program for the elderly, and for lower costs-of-living adjustments for Medicare.
Boehner's tax proposal was first reported by Politico. A Boehner aide would not comment on the report.
Obama has insisted on extending current rates for the 98 percent of taxpayers in household that earn less than $250,000. He would let the top two marginal rates increase from 33 percent to 35 percent and from 36 percent to 39.6 percent for those taxpayers making over that threshold.
Obama has proposed about $600 billion in spending reductions over 10 years, including about $350 billion in Medicare and other health care savings. But he has also proposed about $200 billion in additional spending, including aid to the unemployed and to struggling homeowners and for public works projects.
Fox News' Mike Emanuel and the Associated Press contributed to this report.