House Speaker John Boehner has offered to include higher tax rates on the wealthiest Americans as part of a deficit-reduction deal to avoid the fiscal cliff, a source close to the talks confirmed to CNN on Saturday.
The latest twist in the negotiations, first reported by Politico, indicates a possible breakthrough in the protracted efforts to forge a deal to reduce the nation's chronic federal deficits and debt.
However, Boehner's spokesman said no deal had been reached, though communication continues with the White House.
"The lines of communication remain open but there is no agreement, nor is one imminent," said the spokesman, Michael Steel.
According to the source, who spoke on condition of not being identified further, Boehner proposed allowing tax rates on income over $1 million to return to higher rates of the 1990s while extending current reduced rates for all income up to that threshold.
In return, the Ohio Republican, who is his party's chief negotiator in the talks, wants spending cuts and reforms to entitlement programs as well as the tax system, the source said.
The reforms and cuts sought by Boehner, as described by the source, appear to be more than President Barack Obama will accept.
Obama demands that tax rates increase on income over $250,000, a stance that was central to his re-election campaign and is supported by most Americans, according to consistent poll results.
The president has said he would be open to compromise on entitlement reforms and spending cuts once Boehner and Republicans agree to the higher rates on top income brackets.
Boehner has been under pressure from the White House, Democrats, the business community and some fellow Republicans to give up a staunch opposition to any increase in tax rates.
The speaker has previously offered to increase tax revenue by eliminating unspecified deductions and loopholes, but drew the line at allowing any rates to go higher.
Conservatives trying to shrink the federal government generally oppose increasing tax revenue. They are particularly opposed to higher tax rates because history shows that once rates go up, it is difficult to later reduce goverment revenue by lowering them again.
Obama and Democrats argue that increased revenue, including higher tax rates on the wealthy, must be part of broader deficit reduction to avoid the middle class from getting hit too hard.