U.S. Republicans tried to squeeze more concessions from the White House on taxes on Tuesday in political maneuvering for a deal that would prevent the U.S. economy from going over the "fiscal cliff" in the new year.
With an agreement between President Barack Obama and House of Representatives Speaker John Boehner looking more likely, the Republicans pressed for Democrats to agree to raising taxes only on people making incomes exceeding $1-million (U.S.) a year.
The Republican proposal, known as Plan B, was part of a political dance by both parties to try to spin the narrative in their favour even as they edged closer to agreement.
The White House rejected the offer but remained confident of an agreement after both sides made compromises in recent days.
"The President has demonstrated an obvious willingness to compromise and move more than halfway toward the Republicans," White House spokesman Jay Carney told reporters, adding that Mr. Obama is making a "good faith" effort to reach a compromise.
While a bipartisan bargain could still fall apart, hopes of an accord rose on Monday night after Mr. Obama made a concession to Republicans by offering to limit tax increases to incomes exceeding $400,000 per household. That is a higher threshold than the $250,000 he had sought earlier.
Mr. Boehner, the top Republican in Congress, said he planned to move a "Plan B" bill to the House floor, possibly this week, in a move that could spur forward his talks with Mr. Obama. The House in controlled by Republicans and the Senate by Democrats.
The expiration of low tax rates enacted under former president George W. Bush is a key component of the "fiscal cliff" that lawmakers are trying to prevent from taking hold next month, along with deep automatic government spending cuts. Left unchecked, these changes could trigger another recession, economists have warned.
Analysts said Mr. Obama and Mr. Boehner may strike a tax compromise at $500,000 or close to that.
Often challenged by the conservative wing of his caucus, Mr. Boehner held Republican lawmakers together in support of his efforts to forge a deal with Mr. Obama. The Speaker emerged largely unscathed from a potentially tough meeting with his fellow House Republicans on Tuesday morning.
Representative Darrell Issa, a key committee chairman, said his fellow House Republicans "were supportive of the Speaker. ... I saw no one there get up and say, 'I can't support the Speaker.'"
With opinion polls showing broad support in the United States for raising taxes on the wealthiest Americans and Mr. Obama still buoyed by his re-election last month, the Republicans' traditional opposition to tax hikes has waned somewhat.
The Obama-Boehner talks have largely overcome stark ideological differences and are focused increasingly on narrower disagreements over numbers, which has soothed nervous financial markets.
Optimism about improved chances for an agreement helped lift the Dow Jones industrial average of 30 industrial stocks up less than 1 per cent to nearly a two-month high at midday. The gain followed a steep rally on Monday.
Mr. Obama could face unrest from rank-and-file fellow Democrats. Liberals were likely to oppose a key compromise he has offered to permit shrinking cost-of-living increases for all but the most vulnerable beneficiaries of the Social Security retirement program. His proposal calls for using a different formula, known as "chained Consumer Price Index," to determine the regular cost-of-living increases, essentially reducing benefits.
"I am committed to standing against any benefit cuts to programs Americans rely on, and tying Social Security benefits to chained CPI is a benefit cut," Democratic Representative Keith Ellison said in a statement.
Before Mr. Obama's concession on Monday to set the tax-rate increase floor at $400,000 per household, Mr. Boehner had earlier conceded that the Bush-era tax rates could be allowed to expire for the wealthiest Americans. He had opposed this for months.
Mr. Obama also moved closer to Mr. Boehner on the proportion of a 10-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Mr. Obama is now willing to accept a revenue figure of $1.2-trillion, down from his previous $1.4-trillion proposal.
Mr. Boehner's latest proposal calls for $1-trillion in new tax revenue from higher tax rates and the curbing of some tax deductions taken by high-income Americans.
Missing from Mr. Obama's latest offer was any extension of the so-called "payroll tax holiday" that ends on Jan. 1, bringing an immediate tax increase on wage earners.
Possible plans to produce cuts in spending for Medicare and Medicaid, the government health insurance programs for seniors and low-income Americans, respectively, remained to be discussed.
Mr. Boehner and Mr. Obama have made headway on the politically explosive question of the President's ability to avoid constant battles over raising the nation's debt ceiling, which controls the level of borrowing by the government. Mr. Boehner is ready to give Mr. Obama a year of relative immunity from conservative strife over the debt ceiling, while Mr. Obama is pushing for two years.