President Obama announced the possible deal Monday afternoon, hours before the tax increases and spending cuts are set to take place.
Sources say taxes would rise on income over $400,000, which the president sees as a big win.
"Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans," Mr. Obama said. "Obviously the agreement that's currently being discussed would raise those rates and raise them permanently."
Some Democrats are not applauding.
They say the president won re-election promising tax hikes above $250,000, not $400,000.
Senate Republican leader Mitch McConnell made the tax deal with Vice President Joe Biden.
One major hang-up is automatic defense and other cuts that kick in at midnight.
Democrats want a two year postponement, with the costs covered by the new tax hike.
Whatever happens before midnight, or doesn't happen, this partisan war over taxes and spending is sure to continue into 2013.