[h=3]By DAMIAN PALETTA[/h]WASHINGTON—The White House won't insist that tax rates on upper-income Americans increase all the way back to the Clinton-era level of 39.6% as part of a deficit-reduction deal, Erskine Bowles said Wednesday.
His comments were based on meetings he had Tuesday with President Barack Obama, Treasury Secretary Timothy Geithner, and other top White House negotiators.
"I didn't sense it, I heard it," Mr. Bowles said.
Mr. Bowles, who co-chaired the White House's 2010 deficit-reduction panel and is now working with chief executives and others to try and broker a deal, said there was a deal to be cut on how to address the expiring Bush-era tax rates, which will force virtually all working Americans to pay higher tax rates in January if an agreement isn't reached.
The White House has said it wants to extend the Bush-era rates for income earned below $250,000, but it wants higher tax rates on income above that amount.
Currently, American households pay a 33% tax rate on income above $250,000 and a 35% tax rate on income above roughly $388,000. Those rates would reset to 35% and 39.6% respectively if the tax rates were allowed to expire. Mr. Bowles said White House officials made clear to him the rates might not have to increase quite that high, as long as they increased a significant amount and were paired with some limits on tax breaks, also known as tax expenditures.
"He wants to make sure that it's real," Mr. Bowles said, referring to Mr. Obama. "He's not opposed to having some of it, in the form of, in my opinion, in the form of tax expenditures, but he wants some portion of it, some major portion of it in the form of higher rates on the top 2% [of American households] so that the revenue actually is there."
The White House has said it believes ending the Bush-era tax breaks for households earning more than $250,000 a year would bring in close to $1 trillion in new revenue over 10 years.
Mr. Bowles was visiting the White House Tuesday with a group of chief executives who were in town to try and convince policy makers to reach a deficit-reduction agreement by the end of the year. He said the point about flexibility on tax rates was made multiple times, by multiple people.
"They would not have said it to this group if it wasn't real," Mr. Bowles said. "And I heard it not only from the team but from the president."
On Tuesday, a crack in Republican unity on taxes appeared when a senior House Republican, Tom Cole of Oklahoma, privately urged his colleagues to accede to the White House's demand that they pass an extension of current tax rates just for income of as much as $250,000.
Associated PressRep. Tom Cole of Oklahoma.
Mr. Cole's comments represented a significant break from the GOP leadership's insistence that all rates be extended, including the upper brackets that Democrats want eventually to increase.
Although many Republicans have said they would be willing to include increased revenues in a year-end budget deal to avert the so-called fiscal cliff—a package of tax increases and spending cuts scheduled to take effect in January—they have refused to accept a rate increase for any bracket even temporarily.
Mr. Cole, whose comments were reported earlier by Politico and confirmed by his staff, represents a notable voice in his party. He is a respected political strategist who once headed its campaign arm. He spoke out on a day when Democrats dug in and showed little willingness to give ground to Republicans' demands in the current budget talks.
Sen. Dick Durbin (D., Ill.), a rare liberal who has supported changes in Medicare and other entitlements as part of a broad budget deal, made clear Tuesday that he wouldn't back them under a short-term agreement to avoid the fiscal cliff.
White House officials suggested in a closed-door meeting with supporters that talks wouldn't heat up for about a week. In the Tuesday meeting, President Barack Obama said he considered the fiscal-cliff debate a defining moment of his presidency.
"The next four weeks could define the next four years," Mr. Obama told a small group of Democrats after joining their meeting in the Roosevelt Room with his top aides, according to a participant.
Republicans criticized what they saw as a lack of progress and girded for a public-relations initiative of their own to galvanize small-business owners in support of their fiscal-cliff proposals, in particular their opposition to raising the top income-tax rates.
"If the president wants a solution to the challenges of the moment, the people he needs to be talking to are the members of his own party, so he can convince them of the need to act,'' said Senate Minority Leader Mitch McConnell (R., Ky.).
In the wake of an initial White House budget meeting, members of both parties seemed to agree that any fiscal-cliff deal would be linked to a broader budget agreement involving both tax increases and cuts in entitlement programs such as Medicare and Medicaid.
Republicans have since refused to budge on a demand that tax rates remain unchanged, while Democrats insist that upper rates must rise. Republicans have called for big changes in entitlement programs; most Democrats have refused to offer any until Republicans give more ground on taxes.
In his discussion with Democratic supporters Tuesday, Mr. Obama showed no inclination to give ground. He repeated his threat to veto legislation that doesn't make upper-income Americans pay more in taxes and promised he wouldn't accept "a bad deal."
White House communications director Dan Pfeiffer told the group that the White House should know in about seven to 10 days how much Republicans will be willing to compromise on taxes, according to attendees. Senior White House adviser David Plouffe warned the Democrats of a big fight ahead that required the party to stick together, attendees said.
Mr. Durbin, the Senate majority whip and a close Obama ally, was one of the few senior Democratic liberals willing to entertain big changes in Medicare. In a speech Tuesday at Center for American Progress, a liberal think tank, he said Democrats "should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid."
At the same time, he said such changes should be dealt with next year, rather than in a hurried manner during the current lame-duck session of Congress.
White House press secretary Jay Carney said he hadn't seen Mr. Durbin's remarks but said Mr. Obama wants a deal that includes changes to entitlements.
Complicating the already complex budget talks, Mr. Durbin said the year-end budget agreement will have to include an increase in the country's statutory borrowing limit to avoid another fight when the federal debt ceiling is reached, likely early next year. "The president isn't going to sign off on an agreement that doesn't provide some certainty on the debt ceiling," he said.
A GOP House leadership aide said Republicans would insist on greater concessions from Democrats, in addition to any fiscal-cliff agreement, to include the debt ceiling in a deal.
—Janet Hook and Carol E. Lee
contributed to this article.
His comments were based on meetings he had Tuesday with President Barack Obama, Treasury Secretary Timothy Geithner, and other top White House negotiators.
"I didn't sense it, I heard it," Mr. Bowles said.
Mr. Bowles, who co-chaired the White House's 2010 deficit-reduction panel and is now working with chief executives and others to try and broker a deal, said there was a deal to be cut on how to address the expiring Bush-era tax rates, which will force virtually all working Americans to pay higher tax rates in January if an agreement isn't reached.
The White House has said it wants to extend the Bush-era rates for income earned below $250,000, but it wants higher tax rates on income above that amount.
Currently, American households pay a 33% tax rate on income above $250,000 and a 35% tax rate on income above roughly $388,000. Those rates would reset to 35% and 39.6% respectively if the tax rates were allowed to expire. Mr. Bowles said White House officials made clear to him the rates might not have to increase quite that high, as long as they increased a significant amount and were paired with some limits on tax breaks, also known as tax expenditures.
"He wants to make sure that it's real," Mr. Bowles said, referring to Mr. Obama. "He's not opposed to having some of it, in the form of, in my opinion, in the form of tax expenditures, but he wants some portion of it, some major portion of it in the form of higher rates on the top 2% [of American households] so that the revenue actually is there."
The White House has said it believes ending the Bush-era tax breaks for households earning more than $250,000 a year would bring in close to $1 trillion in new revenue over 10 years.
Mr. Bowles was visiting the White House Tuesday with a group of chief executives who were in town to try and convince policy makers to reach a deficit-reduction agreement by the end of the year. He said the point about flexibility on tax rates was made multiple times, by multiple people.
"They would not have said it to this group if it wasn't real," Mr. Bowles said. "And I heard it not only from the team but from the president."
On Tuesday, a crack in Republican unity on taxes appeared when a senior House Republican, Tom Cole of Oklahoma, privately urged his colleagues to accede to the White House's demand that they pass an extension of current tax rates just for income of as much as $250,000.
Associated PressRep. Tom Cole of Oklahoma.
Mr. Cole's comments represented a significant break from the GOP leadership's insistence that all rates be extended, including the upper brackets that Democrats want eventually to increase.
Although many Republicans have said they would be willing to include increased revenues in a year-end budget deal to avert the so-called fiscal cliff—a package of tax increases and spending cuts scheduled to take effect in January—they have refused to accept a rate increase for any bracket even temporarily.
Mr. Cole, whose comments were reported earlier by Politico and confirmed by his staff, represents a notable voice in his party. He is a respected political strategist who once headed its campaign arm. He spoke out on a day when Democrats dug in and showed little willingness to give ground to Republicans' demands in the current budget talks.
Sen. Dick Durbin (D., Ill.), a rare liberal who has supported changes in Medicare and other entitlements as part of a broad budget deal, made clear Tuesday that he wouldn't back them under a short-term agreement to avoid the fiscal cliff.
White House officials suggested in a closed-door meeting with supporters that talks wouldn't heat up for about a week. In the Tuesday meeting, President Barack Obama said he considered the fiscal-cliff debate a defining moment of his presidency.
"The next four weeks could define the next four years," Mr. Obama told a small group of Democrats after joining their meeting in the Roosevelt Room with his top aides, according to a participant.
Republicans criticized what they saw as a lack of progress and girded for a public-relations initiative of their own to galvanize small-business owners in support of their fiscal-cliff proposals, in particular their opposition to raising the top income-tax rates.
"If the president wants a solution to the challenges of the moment, the people he needs to be talking to are the members of his own party, so he can convince them of the need to act,'' said Senate Minority Leader Mitch McConnell (R., Ky.).
In the wake of an initial White House budget meeting, members of both parties seemed to agree that any fiscal-cliff deal would be linked to a broader budget agreement involving both tax increases and cuts in entitlement programs such as Medicare and Medicaid.
Republicans have since refused to budge on a demand that tax rates remain unchanged, while Democrats insist that upper rates must rise. Republicans have called for big changes in entitlement programs; most Democrats have refused to offer any until Republicans give more ground on taxes.
In his discussion with Democratic supporters Tuesday, Mr. Obama showed no inclination to give ground. He repeated his threat to veto legislation that doesn't make upper-income Americans pay more in taxes and promised he wouldn't accept "a bad deal."
White House communications director Dan Pfeiffer told the group that the White House should know in about seven to 10 days how much Republicans will be willing to compromise on taxes, according to attendees. Senior White House adviser David Plouffe warned the Democrats of a big fight ahead that required the party to stick together, attendees said.
Mr. Durbin, the Senate majority whip and a close Obama ally, was one of the few senior Democratic liberals willing to entertain big changes in Medicare. In a speech Tuesday at Center for American Progress, a liberal think tank, he said Democrats "should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid."
At the same time, he said such changes should be dealt with next year, rather than in a hurried manner during the current lame-duck session of Congress.
White House press secretary Jay Carney said he hadn't seen Mr. Durbin's remarks but said Mr. Obama wants a deal that includes changes to entitlements.
Complicating the already complex budget talks, Mr. Durbin said the year-end budget agreement will have to include an increase in the country's statutory borrowing limit to avoid another fight when the federal debt ceiling is reached, likely early next year. "The president isn't going to sign off on an agreement that doesn't provide some certainty on the debt ceiling," he said.
A GOP House leadership aide said Republicans would insist on greater concessions from Democrats, in addition to any fiscal-cliff agreement, to include the debt ceiling in a deal.
—Janet Hook and Carol E. Lee
contributed to this article.