Top House Republican Boehner stands firm on tax cuts

House Republican Leader John Boehner (R-OH) holds a news conference after sweeping Republican gains in midterm elections, at the U.S. Capitol in Washington, November 3, 2010.

WASHINGTON (Reuters) - John Boehner, the Republican poised to lead the House of Representatives next year, set up a potential showdown with President Barack Obama by pushing his aim to extend tax cuts permanently, even for the wealthy.

"Extending all of the current tax rates and making them permanent will reduce the uncertainty," Boehner said on Wednesday when asked about the potential for compromise when he meets with Obama next week.

The comments echo the hard line taken by top Republicans since they won control of the House of Representatives in elections last week. But that may just be a starting point for talks, especially given that other Republicans have expressed willingness to accept a multiyear extension.

If Congress fails to act before December 31, all individuals will face higher taxes immediately. Economists say a reduction in consumer cash could hamper the economy as it regains strength.

"It sounds to me like where they probably want to be from a negotiating standpoint," said Pamela Olson, a Treasury official in the Bush administration. Still, she said, with deficits as far as the eye can see, no tax policy is really permanent.

Boehner, in line to become House speaker, and other leaders will meet Obama on November 18 to hash out potential areas of agreement when Republicans take control of the House in January.

Obama and Republicans agree tax cuts enacted under former President George W. Bush, which are set to expire at the end of the year, should be extended for families earning less than $250,000 a year. Republicans also want a permanent extension of the rate cuts for the wealthy, which most Democrats oppose.

When lawmakers return to Washington next week for a post-election session, there is a chance they will fail to agree on a compromise, meaning the Bush tax cuts could expire -- at least for a while.

A Republican congressional aide said there was still political risk for Republicans in blocking a deal, in that they could be partly blamed if everyone's taxes rise.

Since Republicans will take control of the House and pick up seats in the Senate after last week's congressional elections, they may prefer to wait to deal with taxes until the new Congress takes office and they have more power.

The White House has floated the idea of a permanent extension of tax cuts for middle-class incomes and a temporary extension for wealthier Americans.

REVISIT THE ISSUE

Some Republicans have already suggested they would be open to a temporary extension of the lower tax rates for everyone, then take the issue up again later, possibly before the 2012 presidential and congressional elections.

"I'm certainly willing to talk about that," said Republican Representative Dave Camp, who is likely to take over the tax-writing House Ways and Means Committee.

Senator Orrin Hatch, likely the top Republican on the Senate Finance Committee, has signaled he may back a multiyear extension of all rates as long as they expire "well past the next election."

Most Democrats want to separate the issue of tax cuts for individuals making less than $200,000 and families making less than $250,000 from cuts for those with higher incomes, thinking it will be tougher for Republicans to defend lower rates for the rich next time they are set to expire.

Before the election, Obama opposed extending cuts for the rich at all, arguing that would create an unacceptable increase in the $1.3 trillion budget deficit. But last week, the White House said it was open to talks with Republicans to extend all the lower tax rates, provided extensions for the wealthy were temporary.

Separately, the bipartisan chairs of the presidential commission on reducing the deficit released their plan, including ways to overhaul the tax code, although it is far from clear how much support their ideas will garner.

Some fiscally conservative Democrats back a two-year extension of all rate cuts, with the hope that lawmakers would work on an overhaul of the byzantine tax code in the meantime.

"I would extend short term," Democratic Senator Kent Conrad said on Tuesday. During that period, lawmakers could work on "thorough tax reform. We have a tax system that just doesn't fit the world we live in today."

(Additional reporting by Andy Sullivan and Donna Smith; Editing by Peter Cooney)