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As the White House and Congressional Republicans near a deal on sweeping tax legislation, including an extension of the Bush-era tax rates for all income levels, President Obama has agreed to give up the “Making Work Pay” tax credit that was the central tax break for middle and low-income Americans in last year’s economic stimulus bill.

Mr. Obama had been pressing for a one-year extension of the Making Work Pay credit, which provided a tax break of up to $400 for individuals and $800 for couples. But Republicans opposed the idea.

An administration official said that in the emerging deal, the “Making Work Pay” credit would be replaced with a one-year reduction in payroll taxes for workers.

In addition to a two-year extension of the income tax rates enacted under President George W. Bush, the deal includes a one-year extension of jobless aid for the long-term unemployed. Officials said negotiators were also close to an agreement to restore the federal estate tax, which lapsed at the start of this year, with an exemption of up to $5 million per individual, and a maximum rate of 35 percent.

Mr. Obama, on a visit to Winston-Salem, N.C. on Monday, said the two sides were working toward an agreement that would prevent a tax increase at the start of the year when the Bush-era rates are due to expire.

“Right now, Democrats and Republicans in Congress are working through some differences to try to get this done,” Mr. Obama said. “And there are some serious debates that are still taking place. Republicans want to make permanent the tax cuts for the wealthiest Americans. I have argued that we can’t afford it right now. But what I’ve also said is we’ve got to find consensus here, because a middle-class tax hike would be very tough not only on working families. It would also be a drag on our economy at this moment.”

Mr. Obama added, “There’s no reason that ordinary Americans should see their taxes go up next year. We should also extend unemployment insurance for workers who’ve lost their jobs through no fault of their own. That is a priority. And I should mention that’s not only the right thing to do, it’s the smart thing to do because if millions of Americans who aren’t getting unemployment benefits stop spending money, that slows down businesses. That slows down hiring. It slows down our recovery.”

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Some Congressional Democrats are growing increasingly nervous that the White House will give in to Republican demands for a temporary extension of all of the Bush-era tax cuts without getting enough in return.

Top Obama administration officials, including Treasury Secretary Timothy F. Geithner, met with bipartisan negotiators from both the House and Senate for two rounds of talks on Wednesday.

Some Democrats are now predicting an announcement of a tax deal by Sunday or Monday. Between now and then, Democrats will scramble to hold a series of symbolic votes aimed at showing Republicans defending lower taxes for millionaires. The first of those votes is expected to take place today in the House.

Republicans view an extension of the lower rates for everyone, for two years or more, as inevitable – as a result of their big victories in the midterm elections and what in hindsight are clear strategic missteps by Democrats in letting the debate come down to the wire.

If Congress does not act by the end of the year, all of the tax rates expire for everyone.

Many Democrats, however, had been hopeful of getting Republicans to agree to at least some of their priorities in return. In particular, they want to extend unemployment benefits for millions of jobless Americans whose aid is starting to run out. At the top of the White House wish list is that Senate Republicans vote to ratify the New Start arms control treaty with Russia.

From one end of Pennsylvania Avenue to the other, officials will insist that none of these issues necessarily has anything to do with one another. And yet when it comes to Congress, everything is connected – if nothing else than by the limited number of hours in the day and days in the week that lawmakers have to work.

On Wednesday, the Senate Republicans made that clear by threatening to stop all business on the Senate floor until the tax debate was resolved and a deal was reached on a temporary spending measure to finance the government.

That gave Democrats a stark choice: cave quickly on the tax issue or face the prospect of accomplishing nothing else between now and the end of the year when they lose their majority in the House and their numbers shrink by five in the Senate.

The tax fight, however, is far more complicated than many people realize. Nearly all of the attention has been focused on the marginal income tax rates, and the debate over President Obama’s campaign promise to let the lower rates expire on income above $250,000 a year for couples or $200,000 for individuals. But there are a dizzying array of other tax issues to be dealt with, including the estate tax, which Republicans want to eliminate entirely, and taxes on dividends and income.

When the Republican Senate leader, Mitch McConnell of Kentucky, tapped his No. 2, Senator Jon Kyl of Arizona, as the lead negotiator in the tax talks, some Democrats and Republicans noted that Mr. Kyl has been the leading Republican voice on the New Start treaty, and wondered if a deal might be in the works.

In making his pick, Mr. McConnell bypassed Senator Charles E. Grassley of Iowa, the  senior Republican on the tax-writing Finance Committee, and Senator Orrin Hatch of Utah, who will take over that slot in January. The majority leader, Harry Reid of Nevada, by contrast, chose the chairman of the finance panel, Senator Max Baucus of Montana, not Senator Charles E. Schumer of New York, who has emerged as his top political lieutenant.

But Mr. Kyl, who serves on the Finance Committee, has also been a leading voice in debates on the estate tax. Permanently eliminating that levy, which Republicans derisively refer to as the “death tax,” is nearly as important to them as preserving the lower marginal rates for the highest earners.

His designation as the lead Senate Republican negotiator in many ways simply indicated that while death and taxes may be a certainty, in the view of ascendant Republicans, the existence of any death tax at all may be one of the few points left to negotiate.

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