* Bush-era cuts expire at year end with no action
* Democrats seek jobless benefit extension
* Reid signals multiyear extension possible (Recasts with Reid comments, additional lawmaker comments)
By Richard Cowan and Kim Dixon
WASHINGTON, Nov 16 (Reuters) - The top Democrat in the U.S. Senate said on Tuesday he was willing to consider a temporary tax cut extension for all income levels, a step that could pave the way for a possible deal with Republicans on Bush-era tax cuts.
“This is something we will take a look at,” Senate Majority Leader Harry Reid told reporters, referring to a plan to extend all the cuts for two or three years.
Many leading Democrats like Reid previously opposed continuing tax cuts for the wealthiest, while they want a permanent extension of existing tax cuts for those individuals making $200,000 or less annually.
Reid and his fellow Democrats will hold a second day of closed meetings on Wednesday to talk about upcoming legislation. While agreeing to look at extending all current tax cuts, Reid said he personally opposed the idea.
“For people to say that these upper-income tax cuts affect most small business is simply not true. My main concern is to prevent a tax hike on the middle class,” he said.
Democrats are politically weakened following the Republican takeover of the House of Representatives and their big gains in the Senate in the Nov. 2 congressional elections.
Powerful Democrats are still pushing to give added tax protection to the middle class. Senate Finance Committee Chairman Max Baucus said it was “my intent, my hope, my desire” to put forward a permanent extension of middle class tax cuts this year.
President Barack Obama has asked congressional leaders to meet with him on Thursday to discuss tax cuts. Legislation is not expected to come up for a vote until after next week’s Thanksgiving break at the earliest.
A deal on a temporary extension of the Bush-era tax rates could also be linked to renewal of unemployment benefits for 2 million Americans about to lose them, a senior Republican in the House of Representatives said.
Representative Pete Sessions, a Republican in leadership, said he could back extending jobless benefits, favored by Democrats like House Speaker Nancy Pelosi, in exchange for an extension of all Bush-era tax cuts, including for the wealthiest groups.
“What we’re going to do is sit down and talk with Mrs. Pelosi,” Sessions told Reuters as he left a meeting of House Republicans. “I see nothing wrong with her winning as long as the American people do.”
Jobless benefits for 800,000 Americans will expire on Nov. 30 if Congress fails to act. Two million in total would lose benefits by the end of December.
The benefits have been renewed several times as the country struggles with near 10 percent unemployment, but Republicans have sought to limit them.
A top Democrat also suggested a deal on taxes and unemployment benefits could be linked.
“It really strikes me as hard to explain why we would give charity to the richest people in America with additional tax cuts of $100,000 a year and deny the basic necessities of life to people who are out of work through no fault of their own,” said Richard Durbin, the No. 2 Democrat in the Senate.
Liberal Democratic Representative Jan Schakowsky said a temporary extension of all rates was looking like a possible outcome.
“It may be” the deal that can pass, she said, after a meeting of House Democrats. “I’d pass the middle class and not the upper income. I hope if we do extend (the upper income rates), it’s for not more than a year.”
Bush-era tax cuts for all individuals expire on Dec. 31 and Democrats, who still control Congress, have only a few weeks to make a deal with Republicans on extending them.
The parties agree on an extension of lower rates for individuals earning less than $200,000 but disagree whether to extend those rates for the highest earners. Republicans say the economy cannot stomach any higher taxes, while Democrats say the nation cannot afford the cost of lower rates for the wealthiest taxpayers.
Obama signaled willingness to compromise with Republicans following their election gains but says he wants to make the lower tax rates permanent for the middle class and signaled any extension for the wealthy must be temporary.
But Democrats, who now control both houses of Congress, were unable to broker a deal before the election, and may now have to settle for a temporary extension of all the rates to prevent taxes rising on Jan. 1 on nearly every American.
Still, the chances that lawmakers will not get in line to make a deal remain, especially with an empowered Republican conservative Tea Party movement.
The leader of the Republicans’ Tea Party Caucus in the House rejected the idea of linking a tax cut extension to an extension of unemployment benefits.
“I don’t think that the American people should have to pay for that by having to have some new massive spending tied to it,” Representative Michele Bachmann said in an interview with ABC’s “Good Morning America.” “If that’s the case, I don’t think you are going to see the Republicans go along with it.” (Additional reporting by Donna Smith and Thomas Ferraro; Editing by Peter Cooney and Cynthia Osterman)