It should be no surprise to learn that the first post-election battle to test the wills of triumphant Republicans and President Barack Obama is over whether to extend Bush-era tax cuts on the wealthiest Americans.

As both sides argued in the lead-up to last Tuesday's midterms, Republicans want to keep the breaks, while Obama and his fellow Democrats prefer to steer tax cuts to the middle class. Over the weekend, it became clear that divide was still nearly insurmountable, although Obama offered one small hint of a compromise.

“We’re willing to start talking about getting an extension of some kind,” Senator Mitch McConnell of Kentucky, the Republican leader in the Senate, said on CBS' Face the Nation. “We don’t think raising taxes on small business is a good idea.”

But while McConnell says Republicans—who will seize control of the House in the next Congress and be a stronger minority in the next Senate—are "willing" to talk to Obama, what he really means is that Republicans are just fine with the Democratic president coming over to their position. An actual compromise with Obama on the tax issue is unlikely if it means Republicans are the ones moving toward the other guys.

"First and foremost, we're not going to be willing to work with him on the expansive liberal agenda he's been about," Representative Eric Cantor said on Fox News Sunday. Cantor, a Virginia Republican, is poised to be the new majority leader in January.

But judging from some comments made to Fox News Sunday host Chris Wallace, Cantor and the old-guard Republicans soon to take power may be dealing with anger within their ranks, namely from the Tea Party movement that wasn't fond of more government spending or more tax breaks. "Talk about not getting it! Party line, smarmy, control freak—how does someone that young get that way? Stop tax cuts for the wealthy. Even some of the wealthy are recommending this. And throw Cantor out in 2012 unless he straightens up," wrote one reader named Dierdra.

The conflict over taxes will play out before Republicans become a much stronger presence in January since Congress is being called back to work November 15 for a so-called "lame duck" session which will be dominated by questions over tax cuts and government spending. At the top of the list is what to do with the temporary tax breaks passed during George W. Bush's presidency, which gave single taxpayers making more than $200,000 a year and households making more than $250,000 significant tax breaks. Those tax cuts are set to expire at the end of the year.

Following the midterms, Obama has said several times that he's willing to work with Republicans on tax cuts, but he's made it clear he's talking about breaks for those below the Bush levels.

"I believe we can't afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires," the president said in his weekly radio and Web address on Saturday.

But in an interview with CBS' 60 Minutes that was broadcast Sunday night, Obama sounded a bit more willing to consider a proposal to extend tax cuts on wealthier Americans for a limited time, as opposed to making them permanent as lawmakers like Cantor want. "We can think about what the economy needs right now, given that it's still weak. And, hopefully, we can agree on a set of facts that leads to a compromise," Obama said.

But Obama faces a difficult task. Compromise too much with Republicans now, and he risks further angering his Democratic base. Such a rift could open the door for a Democrat on the left to mount a challenge to him for the party's presidential nomination in two years, although that prospect is still a slim one.

Even before the elections, when GOP control of the House was never in doubt, analysts were setting up a scenario where Republicans truly would be the party of power.

“It changes the dynamics of what the debate is about,” said Dean Zerbe, national managing director for alliantgroup—a Houston-based provider of specialty tax services—and a former senior counsel for the Senate Finance Committee. More Democrats will decide they “should be respectful of what the voters have said,” Zerbe said before the election.

Whatever happens, tax experts say a decision needs to be made soon so business owners can do tax planning. “I think there’s going to be mounting pressure from small businesses on both sides of the aisle to get something done in time to make decisions before year-end,” said Bill Smith, managing director of the national accounting firm CBIZ MHM.

Kent Hoover, Washington bureau chief for The Business Journals and Washington correspondent for Portfolio.com, contributed to this report.

---

J. Jennings Moss is editor of Portfolio.com.