Lawmakers optimistic about deal on tax cuts

Democrat Senate Majority Whip Richard Durbin (D-IL) (L) and Republican Senate Minority Whip Jon Kyl (R-AZ) discuss the Senate's agenda during the lame duck session on CBS News' ''Face the Nation'' in Washington December 5, 2010.

WASHINGTON (Reuters) - Senior lawmakers said on Sunday they were optimistic about striking a deal to extend Bush-era tax cuts for all taxpayers and continue emergency jobless aid for millions of long-term unemployed Americans.

President Barack Obama and other Democratic leaders want to extend the cuts only for low- and middle-income Americans, arguing that the tax breaks for the wealthy would add $700 billion to budget deficits over the next 10 years.

Republicans, who made big gains in the November 2 congressional elections, want rates unchanged for all taxpayers. They say the uncertainty over taxes discourages investment and hurts job growth as the economy recovers from the worst recession since the Great Depression.

"Most folks believe the recipe (of a deal) would include at least an extension of unemployment benefits for those who are unemployed and an extension of all of the tax rates for all Americans for some period of time," Republican Senator Jon Kyl said on CBS's "Face the Nation" program.

Kyl, who has been involved in negotiations with the White House, said negotiators were still working on the details of a package. "At least in theory an agreement could be reached in the relatively near future," he said.

Tax rates would increase in January unless Congress takes action before it adjourns, as expected later this month.

Many Democrats would like to settle the tax issue before the new Congress is seated in January, when Republicans will take control of the House of Representatives.

Vice President Joe Biden discussed tax-cut strategy with House Speaker Nancy Pelosi, her No. 2, Steny Hoyer, and Representative Chris Van Hollen, a Democratic official said.

The unusual two-hour Saturday night session at Biden's residence suggested the administration would like to get the tax-cut issue behind them before the end of the year.

JOBLESS AID

Dick Durbin, a top Senate Democrat, said on the CBS program that any deal that did not include an extension of aid for millions of unemployed whose benefits have been exhausted was a "non-starter."

Extended jobless aid began to expire this week when Congress did not agree on an extension.

"The notion that we would give tax cuts to those making over a million dollars a year, which is the Republican position, and then turn our backs on 2 million Americans who will lose unemployment benefits before Christmas ... is unconscionable," Durbin said.

Democratic measures to extend tax cuts for all but the wealthiest fell short of the 60 votes needed to pass legislation in the 100-member Senate on Saturday, as had been expected.

Republicans, the minority party in the Senate, had dismissed the move as a political stunt. They argue that raising taxes for the rich would be a mistake that would cost jobs because the wealthy can create jobs.

Senate Republican leader Mitch McConnell said the Senate vote on Saturday meant that all taxpayers would continue to enjoy the benefits of Bush-era tax cuts.

"I think it's pretty clear now that taxes are not going up on anybody in the middle of this recession," McConnell said on NBC's "Meet the Press" program. "We're discussing how long we should maintain current tax rates."

(Editing Paul Simao and Vicki Allen)