WASHINGTON — Vice President Joseph R. Biden Jr. and Senator Mitch McConnell, the Republican leader, on Monday reached agreement on a tentative deal to stave off large tax increases starting on Tuesday, but remained stuck on whether and how to stop $110 billion in across-the-board spending cuts in 2013, an official familiar with the negotiations said.
Under the emerging deal, income taxes would rise to 39.6 percent from 35 percent on income over $400,000 for single people and $450,000 for couples. Above those income levels, dividends and capital gains tax rates would also rise, to 20 percent from 15 percent.
Speaking at the Eisenhower Executive Office Building adjacent to the White House, President Obama took note of the progress.
“Today it appears that an agreement to prevent this New Year’s tax hike is within sight, but it is not done,” he said. “There are still issues left to resolve but we are hopeful that Congress can get it done. But it is not done.”
The official familiar with the deal stressed that taxes would rise in some sense on the top 2 percent of earners, as Mr. Obama had wanted. That is because the deal would reinstate provisions to tax law, ended by the Bush tax cuts of 2001, that phase out personal exemptions and deductions for the affluent. Those phaseouts, under the agreement, would begin at $250,000 for single people and $300,000 for couples.
The estate tax would also rise, but considerably less than Democrats had wanted. The value of estates over $5 million would be taxed at 40 percent, up from the current 35 percent. Democrats had wanted a 45 percent rate on inheritances larger than $3.5 million.
Under the deal, the new rates on income, investment and inheritances would be permanent.
Mr. Obama and the Democrats would be granted a five-year extension of tax cuts they won in the 2009 stimulus law for middle-class and working-poor taxpayers. Those include a child credit that goes out as a check to workers who do not earn enough money to pay income taxes, an expanded earned income credit and a refundable credit for tuition.
Democrats also secured a full year’s extension of unemployment insurance without strings attached, a $30 billion cost.
All combined, the official said, the new package would raise about $600 billion over 10 years, compared to the revenue generated if current tax levels were simply extended. That, he said, is 85 percent of the revenue Democrats had wanted to raise under Mr. Obama’s initial proposal, which would have raised around $700 billion.
In addition, the deal would stave off sharp cuts for one year to health care providers who treat Medicare patients. That cost, about $30 billion, would be paid for with cuts to other health care programs.
The official said all those provisions are sealed, but a big issue remains open: what to do about automatic spending cuts. Democrats, including the White House, are demanding a one-year “pause” to give negotiators time to strike a broader deficit reduction deal. Republicans have offered a three-month hiatus but no more.
“It would be crazy to not come together on this,” the official said.
Democrats are more likely to protest the deal than Republicans. Liberals are already complaining that almost all of the Bush tax cuts would be made permanent, but that Democratic tax cuts secured in the stimulus law get only a five-year lease on life. Richard L. Trumka, the head of the A.F.L.-C.I.O., is demanding a separate vote to kill any cut to the estate tax, which goes to the richest of the rich.
Senator Tom Harkin, a liberal Democrat from Iowa, earlier Monday warned that the negotiations were producing what “looks like a very bad deal the way this is shaping up.”
Some conservatives in the House will almost immediately criticize the deal, saying it lacks sufficient spending cuts. House leaders were waiting to get full details of any agreement and were particularly interested in details on the sequester.
Shape of Fiscal Deal Emerging, but Spending Still at Issue
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Shape of Fiscal Deal Emerging, but Spending Still at Issue
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Shape of Fiscal Deal Emerging, but Spending Still at Issue
