Image: Jim DeMint
Jacquelyn Martin  /  AP
"If the president wants to compromise on a two- or three-year extension ... if that's all we can get out of the president, and he is the president, so we'll work with him on that," said Sen. Jim DeMint. 
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updated 11/14/2010 4:04:31 PM ET 2010-11-14T21:04:31

The White House and Republican lawmakers set the terms of a looming tax debate Sunday, coalescing around a possible temporary extension of existing income tax rates that would protect middle-class and wealthy Americans from sharp tax increases next year.

Top White House adviser David Axelrod stressed that President Barack Obama opposes a "permanent" extension of current tax rates for individuals making more than $200,000 a year and married couples making more than $250,000.

But Axelrod was carefully silent on the possibility of extending current tax rates for the short term. He said he wants to leave negotiations to Obama and members of Congress.

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"The bottom line is he wants to sit down and talk about this," Axelrod said. "There is no bend on the permanent extension of tax cuts for the wealthiest Americans."

A compromise would put off fundamental questions about taxes for the time being, virtually guaranteeing their prominence as campaign issues heading into the 2012 presidential election. That debate also would dovetail with a more profound discussion over how to rein in deficits and reduce the nation's escalating debt.

Congress returns this week with Democrats in control of the House and Senate for a lame-duck session that is expected to stretch into December. But Republican votes are essential and the GOP has additional leverage because it will begin the new year with Republicans in charge of the House and with more members in the Senate.

Senate Minority Leader Mitch McConnell has introduced legislation that would extend the current tax rates permanently, but on Sunday signaled an openness to negotiate.

"I'm willing to listen to what the president has in mind for protecting Americans from tax increases," McConnell, R-Ky., said in a statement.

Two prominent Republicans conceded on Sunday that the best Congress might be able to accomplish in the coming weeks is a short term-continuation of the current tax rates, set under President George W. Bush in 2001 and 2003.

"If the president wants to compromise on a two- or three-year extension ... if that's all we can get out of the president, and he is the president, so we'll work with him on that," said Sen. Jim DeMint, a South Carolina Republican and a leader of his party's conservative wing.

Likewise, Sen. John McCain of Arizona, the Republican presidential contender in 2008, said he could fathom a short-term extension of all the tax cuts. McCain voted against the Bush tax cuts in 2004, saying they disproportionately benefited wealthy Americans.

"They should be extended until we are out of this recession," McCain said. "At such time we can look at other tax hikes. But when we're in a serious recession I cannot believe that raising taxes is a good thing on anybody."

In fact, the recession ended in June 2009, but the recovery has been markedly slow, with unemployment stuck at 9.6 percent.

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Obama, fresh from a round of international negotiations that yielded mixed results, will put his bargaining skills to the test again this week at a White House meeting and dinner with a bipartisan group of congressional leaders. Democrats will be looking for his signal on how to proceed on tax rate extensions.

Some Senate Democrats have already been laying down their markers, however. Sen. Chuck Schumer, D-N.Y., argued for current tax rates to be extended for all taxpayers except those making more than $1 million. He said such a limit would ensure that tax rates would remain the same for the middle-class and "virtually all small businesses."

Schumer said millionaires and billionaires have seen their incomes rise this decade while middle-class incomes have fallen.

Meanwhile, Sen. Mark Warner, a moderate Virginia Democrat and a former entrepreneur worth millions of dollars, has proposed letting tax rates expire for the top 2 percent of earners while enacting targeted business tax cuts instead.

"The problem with the two-year extension is ... extensions have a tendency to end up becoming permanent and most economists would say giving folks like me an additional tax cut might not be the best value," he said.

Axelrod appeared on "Fox News Sunday" and NBC's "Meet the Press." McCain appeared on NBC and DeMint on Fox. Schumer spoke on CBS' "Face the Nation." Warner appeared on CNN.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: New D.C. reality greets Obama upon return

  1. Transcript of: New D.C. reality greets Obama upon return

    HOLT: Good evening.

    LESTER HOLT, anchor: President Obama is back at the White House tonight, back home after his whirlwind trip to Asia . He set out on that trip just days after getting what he called a shellacking in the midterm elections. He'll barely have time to unpack his bags before confronting the challenges of Washington 's new political landscape, including a Republican challenge to one of his hallmark campaign pledges on taxes. NBC 's Mike Viqueira is at the White House to tell

    us about a very big week there. Mike: Good evening, Lester . After an Asia trip that saw both successes and letdowns, it doesn't get any easier for the president from here on out. Tomorrow that lame duck session of Congress begins, and Mr. Obama faces a Republican Party that is emboldened and Democrats trying to regroup. Back home after 10 days abroad, today President Obama stepped off Marine One and arrived home to a new Washington reality. Near Capitol Hill the Republicans were coming, some 85 of them, joining all newly elected candidates to learn the ropes and prepare for January when they are sworn in to a new GOP -ruled house.

    MIKE VIQUEIRA reporting: I look forward to representing my constituents and very thankful for their support.

    Representative JUSTIN AMASH (Republican, Michigan): But for now Democrats are still in charge. Tomorrow Nancy Pelosi convenes a lame duck session where a fight over renewing Bush era tax cuts looms. Amid signs Mr. Obama will soften his position and accept a temporary extension of cuts for the wealthy, today a top Obama aide would not tip the president's hand.

    VIQUEIRA: Is he open to compromise?

    DAVID GREGORY reporting: The answer to your question, there's no -- there's no bend on the permanent extension of tax cuts for the wealthiest Americans .

    Mr. DAVID AXELROD: He's open to compromise?

    GREGORY: He wants to sit down -- we want to get this done. The American people expect to get this done, and we are -- we are eager to sit down and talk about how to move forward.

    Mr. AXELROD: But compromise is growing more likely. Today a conservative senator and tea party leader said he would go along with a temporary renewal.

    VIQUEIRA: Well, if that's all we could get out of the president, and he is the president, so we'll work with him on that.

    Senator JIM DeMINT (Republican, South Carolina): Much depends on Pelosi . Liberals are urging her and the president to draw the line on extending cuts for the wealthy. And today one party moderate announced a long shot challenge to Pelosi for the post of Democratic leader.

    VIQUEIRA: And if it comes down to this coming week and she doesn't step aside, then I will challenge her.

    Representative HEATH SHULER (Democrat, North Carolina): And while it isn't an official announcement, today top aide Axelrod , an architect of Mr. Obama 's 2008 run, gave a strong indication that the president will mount a 2012 bid for re-election.

    VIQUEIRA: Sometime in the spring -- late winter or early spring, I'll be going back -- coming back here to Chicago and beginning to work on that -- on that project.

    Mr. AXELROD: And, Lester , we may know more late Thursday about the outcome of that tax cut debate. That's when the president has invited all congressional leaders, Democrats and Republicans , House and Senate , here to the White House for a meeting and then he's going to take them upstairs for dinner and

    VIQUEIRA:

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