Obama says no ‘red lines’ on top tax rate, signaling some flexibility in debt talks

President Obama cracked open the door to compromise with Republicans on tax rates for the nation’s wealthiest households Wednesday, saying he is “open to new ideas” for increasing their tax bills without letting the top rate rise as scheduled in January to 39.6 percent.

Obama flatly rejected Republican calls to let the top rate remain at 35 percent, where it has stood for more than a decade under legislation adopted during the George W. Bush administration. And he shot down a GOP proposal to cap deductions for mortgage interest, charitable giving and other expenses in return for extending the Bush-era tax rates for the wealthy.

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But in a break with the position he took on the campaign trail, Obama said he would not insist on drawing “red lines” around 39.6 percent, the rate in effect for top earners during the Clinton administration. Democrats familiar with White House thinking said Obama is willing to set the top rate somewhat lower — around 37 percent or 38 percent — as long as the overall burden grows for families earning more than $250,000 a year.

“With respect to the tax rates, I just want to emphasize I am open to new ideas,” Obama said at a White House news conference. “If the Republican counterparts, or some Democrats, have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn’t getting hit, reduces our deficit, encourages growth, I’m not going to just slam the door in their face. I want to hear ideas from everybody.”

It was not clear how Obama’s concession would affect negotiations over the “fiscal cliff,” a massive accumulation of expiring tax breaks and spending cuts that threatens to throw the nation back into recession early next year. With talks scheduled to start Friday at the White House, House Speaker John A. Boehner (R-Ohio) and other GOP leaders have offered to raise fresh tax revenue, but only if Democrats agree to restrain spending on health and retirement programs and to rewrite the tax code to push the top rate even lower than 35 percent.

At a news conference immediately after his reelection Wednesday as speaker, Boehner said he remains “optimistic.”

“If you look closely at what the president had to say and you look closely at what I had to say, there are no barriers here to sitting down and beginning to work through this process,” he said. “I don’t think anyone on either side of the aisle underestimates the difficulty that faces us.”

Other top Republicans reacted with annoyance to the president’s remarks. House Ways and Means Committee Chairman Dave Camp (Mich.) said Wednesday’s news conference marked the third time since the election that Obama has publicly discussed the fiscal cliff without offering an explicit path forward. And with Obama set to leave Friday for Southeast Asia, Camp said, negotiations are unlikely to begin in earnest until after the Thanksgiving break.

“Time is running short, and, frankly, we don’t have time to waste on offers that are going nowhere,” Camp said in a statement.