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‘Fiscal cliff’ negotiations: Boehner offers concessions on higher tax rates

- Associated Press - Sunday, December 16, 2012

WASHINGTON (AP) — Big differences remain, but there is finally movement in long-stalled talks on avoiding the "fiscal cliff."

House Speaker John Boehner is offering $1 trillion in higher tax revenue over 10 years and an increase in the top tax rate on people making more than $1 million a year. He's also offering a large enough extension in the government's borrowing cap to fund the government for one year before the issue must be revisited — conditioned on President Obama agreeing to the $1 trillion in cuts.

The offer, made Friday after a long impasse between Boehner, Ohio Republican, and Mr. Obama, calls for about $450 billion in revenue from increasing the top rate on million-dollar-plus income from 35 percent to the Clinton-era rate of 39.6 percent.

The additional revenue would be collected through a rewrite of the tax code next year and by slowing the inflation adjustments made to tax brackets.

In return, Mr. Boehner is asking for $1 trillion in spending cuts from government benefit programs like Medicare. Those cuts would defer most of a painful set of across-the-board spending cuts set to slash many domestic programs and the Pentagon budget by 8-9 percent, starting in January.

Mr. Boehner also continues to press for a less generous inflation adjustment for Social Security benefits, a move endorsed by many budget hawks. Mr. Obama and Democrats on last year's deficit "supercommittee" endorsed the idea in offers made last year, but they're more reluctant now.

Democrats rejected the offer and some say an increase in the Medicare eligibility age is a nonstarter. They are also pressing for extended jobless benefits for the long-term unemployed.

Mr. Boehner's proposal was described by officials familiar with it. They required anonymity because of the sensitivity of the talks.

The movement comes as an increasing number of Republicans have called for a tactical retreat that would hand Mr. Obama a victory on his longstanding campaign promise to raise taxes on households making more than $250,000 a year. That increase, combined with an increase in the tax rate on investment income from 15 to 20 percent, would raise about $800 billion in tax revenue over a decade.

In that context, Mr. Boehner's move could be seen as an attempt to get spending cuts linked to the rate increase rather than giving them up and getting nothing in return.

Still, the Boehner offer is sure to cause unrest among many conservative Republicans dead set against raising tax rates at all.

Mr. Obama has offered $600 billion in spending cuts over a decade, including $350 billion from federal health care programs and $250 billion from other cuts to domestic programs like farm subsidies and the pension program for federal workers, and through sales of used federal property.

Mr. Obama and Mr. Boehner met Thursday in a session described as "frank" by both sides. Mr. Boehner's offer and a follow-up phone call came the next day — amid increasing speculation that Republicans might move on to a plan B in which they would give Mr. Obama a win on tax rates for upper-bracket earners and renew the fight when increasing the government's borrowing cap, which needs to be done soon, probably in February.

Mr. Boehner's $1 trillion cut proposal would be paired with a comparable increase in the borrowing cap, enough to keep the government borrowing for about a year. But if the cuts are smaller, the debt limit increase would be smaller as well.

"Our position has not changed. Any debt limit increase would require cuts and reforms of a greater amount," said Boehner spokesman Brendan Buck.

Mr. Obama originally sought $1.6 trillion in new tax revenue over a decade and has since revised that to $1.4 trillion. He would probably go lower, a decision fueled in part by resistance from Democratic allies in the Senate to Obama proposals like taxing capital gains and income at rates equal to earned income.

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