Some Dems: Drive over ‘fiscal cliff,’ then bargain

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The plan also would move upwardly mobile earners into higher tax brackets more quickly. It would reinstate the 2009 estate tax exclusion to $3.5 million, with a tax rate of 45 percent for values above that threshold. And it would raise the tax rate for capital gains and dividends by 5 percentage points, to 23.8 percent.

"Nearly all revenue from this package comes from upper income earners," Kessler said. His group would prefer to raise tax rates on the wealthiest, he said. But the compromise plan gives Republicans a break on that contentious issue.

Also embroiled in the end-of-year negotiations is the Alternative Minimum Tax, which Congress routinely adjusts to prevent big tax hikes on millions. If Congress fails to act by Dec. 31, an additional 28 million middle-income families would be hit with a large and unexpected tax increase when they file their 2012 returns next spring, the IRS says. Also, the annual AMT "patch" usually includes a rule that affects how tax credits are calculated for about 60 million taxpayers. Those taxpayers — about half of all individual filers — would have to wait until at least the end of March to file their returns while the IRS reworks its systems to account for the existing AMT patch expiring, the agency said.

White House spokesman Jay Carney said Obama hopes for a big bipartisan compromise that will include spending cuts, revenue increases and other features to avert the fiscal cliff. Obama has made it clear, Carney said, "that he is not wedded to every aspect of his plan, and that he understands that in order to reach an agreement, everyone needs to compromise, and that compromise should not be a dirty word in Washington."

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Associated Press writers Jim Kuhnhenn and Stephen Ohlemacher contributed to this report.

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