* House Speaker Boehner offers "Plan B" back-up plan
* Obama, Boehner inch toward deal to avert "fiscal cliff"
* Sweeping tax hikes, deep spending cuts slated for 2013
WASHINGTON, Dec 18 (Reuters) - Republicans tried to wring more tax-rate concessions out of the White House on Tuesday as political maneuvering intensified over an agreement to keep the U.S. economy from tumbling off the "fiscal cliff" next year. Markets rallied on hopes for a deal.
After important concessions in recent days from both President Barack Obama and House of Representatives Speaker John Boehner, Republicans moved to increase pressure on the Democrats by vowing to vote in the House on a "Plan B" back-up measure that would largely disregard the progress made so far.
The Republican proposal was part of a political dance by both parties to try to spin the "fiscal cliff" narrative in their favor even as they edged closer together. The White House rejected the offer but remained confident of an agreement.
"The president has demonstrated an obvious willingness to compromise and move more than halfway toward the Republicans," White House spokesman Jay Carney told reporters, adding that Obama is making a "good faith" effort to reach a compromise.
House Republicans were still meeting to discuss the matter on Tuesday evening.
Global stocks advanced to their highest levels since September amid rare signs of compromise on Capitol Hill. Investors shifted funds to stocks and the euro and pulled away from safe-harbor assets such as bonds, gold and the U.S. dollar.
The benchmark Dow Jones industrial average of 30 industrial stocks closed at 13,232.4, up less than 1 percent on the day.
"They've still got a long way to go, but you can't help but say that the odds are better today than they were on Friday that we'll get some sort of agreement," said Republican Representative Tom Cole.
While a bipartisan bargain could still fall apart, hopes of an accord rose on Monday night after Obama made a concession to Republicans by offering to limit tax increases to incomes exceeding $400,000 per household. That is a higher threshold than the $250,000 that the president had sought earlier.
Boehner, the top Republican in Congress, had earlier conceded on Obama's insistence that tax rates rise on the wealthiest Americans, but the two have been unable to agree on what income levels should be included in that category.
Analysts said Obama and Boehner may strike a compromise at $500,000 or close to that, though time was running short.
Boehner told reporters that he planned to move a "Plan B" bill to the House floor, possibly this week, in a move that could spur forward his talks with Obama. The House is controlled by Republicans and the Senate by Democrats.
One House Republican aide, asked about prospects for "Plan B" on the House floor, said: "It wouldn't be surprising ... if a lot of conservatives balk at something like that."
'WE CAN DO BETTER'
If the back-up plan fails, Republicans supporting it could afterward tell constituents back home that at least they voted for it and, in doing so, did their best to try to block Obama's agenda.
Even as he presented the Plan B measure, Boehner said he would continue to negotiate with Obama on a broader agreement.
"Plan B is Plan B for a reason. It's a less-than-ideal outcome. I've always believed we can do better," Boehner said.
The expiration of low tax rates enacted under former President George W. Bush is a key component of the "fiscal cliff" that lawmakers are trying to prevent from taking hold next month, along with deep automatic government spending cuts.
Left unchecked, these fiscal jolts could trigger another recession, economists have warned.
Often challenged by the conservative wing of his caucus, Boehner held Republican lawmakers together in support of his efforts to forge a deal with Obama. The speaker emerged largely unscathed from a potentially tough meeting with his fellow House Republicans on Tuesday morning.
Representative Darrell Issa, a key committee chairman, said his fellow House Republicans "were supportive of the speaker. ... I saw no one there get up and say, 'I can't support the speaker.'"
With opinion polls showing broad support in the United States for raising taxes on the wealthiest Americans and Obama still buoyed by his re-election last month, the Republicans' traditional opposition to tax hikes has waned somewhat.
The Obama-Boehner talks have largely overcome stark ideological differences and are focused increasingly on narrower disagreements over numbers.
Still, Obama could face unrest from fellow Democrats. Liberals were likely to oppose a key compromise he has offered to permit shrinking cost-of-living increases for all but the most vulnerable beneficiaries of the Social Security retirement program. His proposal calls for using a different formula, known as "chained Consumer Price Index," to determine the regular cost-of-living increases, essentially reducing benefits.
"I am committed to standing against any benefit cuts to programs Americans rely on, and tying Social Security benefits to chained CPI is a benefit cut," Democratic Representative Keith Ellison said in a statement.
Obama also moved closer to Boehner on the proportion of a 10-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 from higher tax rates and the curbing of some tax deductions taken by high-income Americans.
Missing from Obama's latest offer was any extension of the so-called "payroll tax holiday" that ends on Jan. 1, bringing an immediate tax increase on wage earners.
Possible plans to produce cuts in spending for Medicare and Medicaid, the government health insurance programs for seniors and low-income Americans respectively, remained to be discussed.
Boehner and Obama have made headway on the politically explosive question of the president's ability to avoid constant battles over raising the nation's debt ceiling, which controls the level of borrowing by the government. Boehner is ready to give Obama a year of relative immunity from conservative strife over the debt ceiling, while Obama is pushing for two years.