(CBS) – This could be the pivotal week in talks to resolve the tricky issue of tax cuts.

We have learned from key local lawmakers that talks are underway between the Obama White House and Republican leaders about extending Bush tax cuts to the middle class permanently and to wealthier taxpayers for another two years.

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The Democratic leadership is publicly insisting that they will not go for an extension to higher wage earners but time is running out for Democrats in this session as the House goes Republican and their Senate majority is cut come next year.

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The White House has been hinting it wants a deal with the Republicans but the real bottom
line to any deal is how the deficit would be cut. With that there’s only one way left, slashing spending dramatically.

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Reported by: Larry Kane, KYW Newsradio