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Republicans want to move beyond tax rate fight on the wealthy

WASHINGTON (Reuters) - Conservatives have no choice but to give into White House demands on higher tax rates for the wealthy, if the fiscal debate is to move to their main goal, overhauling big government benefits programs, several Republicans said on Sunday.

"There is a growing group of folks who are ... realizing that we don't have a lot of cards as it relates to the tax issue before yearend," Republican Senator Bob Corker of Tennessee said on the "Fox News Sunday" program.

The Bush-era tax cuts for all Americans are set to expire at the end of the year if Congress and the Obama administration fail to pass legislation to extend the tax breaks.

The White House and Republican congressional leaders are deadlocked over the tax rate on upper income earners, and without resolution massive tax rates are to kick in shortly.

It is this $500 billion in tax increases along with $100 billion in automatic spending cuts that comprise the year-end "fiscal cliff." Economists and policymakers warn it could drive the U.S. economy into recession.

President Barack Obama and fellow Democrats are insisting that the tax break expire for families with incomes above $250,000, and remain in place for other taxpayers. They are wagering that if all the tax cuts expire, the public will blame Republicans for raising taxes on the middle class.

"Some of our people think if we just dig in and hold strong we can stop it. That's just not the case. It happens automatically. You have to do something," said Republican Representative Tom Cole on CNN's "State of the Union."

"In my view, we all agree that we're not going to raise taxes on people that make less than $250,000, we should just take them out of this discussion right now," Cole of Oklahoma said.

Rank and file Republicans are eager to move beyond that fight to overhauling Social Security and Medicare, which are both on track to start running out money without major reforms.

"A lot of people are putting forth a theory - and I think it has merit - where you go ahead and give the president the ... rate increase on the top 2 percent, and all of a sudden the shift goes back to entitlements," Corker said.

Republican Senator Tom Coburn, also of Oklahoma, said it would take significant reforms to the Medicare health care and Social Security retirement programs for him to agree to a tax rate increase.

"Will I accept a tax increase as part of a deal to actually solve our problems? Yes," Coburn said on ABC's "This Week" television program.

(Reporting by Rachelle Younglai, additional reporting by Lisa Lambert; Editing by Jackie Frank)

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