Obama’s tax olive branch could pave way to fiscal deal

The move, which the source stressed was not Obama’s final offer, was welcomed, albeit with reservations, by a spokesman for Republican House of Representatives speaker John Boehner, who met earlier in the day with Obama as the two hammered out a way to avert steep tax hikes and indiscriminate spending reductions set for the beginning of 2013.

Considerable work remains as both sides now try to bridge the gaps between them and then sell a package to their respective allies in the US Congress.

In its most dramatic change in position yet, the White House proposed leaving lower tax rates in place for everyone except those earning $400,000 and above, the source said on condition of anonymity. That’s up from the $250,000-threshold the president has been demanding for months, but still far from Boehner’s preference of $1 million.

Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4-trillion proposal.

Boehner’s latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take.

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