Private talks between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell that began Dec. 28 stalled Sunday because of disputes over income tax rates, the estate tax and other issues.

McConnell, a Kentucky Republican, reached out to Vice President Joe Biden in an effort to break the impasse, while staffers worked into the night trading and reviewing offers.

“There’s still significant differences between the two sides but negotiations continue,” Reid, a Nevada Democrat, said on the Senate floor. The Senate will reconvene Monday at 11 a.m. Washington time and “perhaps” have further announcements then, he said. “I certainly hope so.”

Congress is working to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start taking effect Tuesday.

Allowing those changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.

U.S. stock futures rose, paring the decline indicated for the Standard & Poor’s 500 Index at the open today. S&P 500 futures expiring in March gained 0.2 percent to 1,386.5 at 7:20 a.m. in New York. The contract implies the benchmark gauge for American equities will open about 0.7 percent lower.

Tax Cuts

Tax cuts first enacted during George W. Bush’s presidency are scheduled to expire tonight. President Barack Obama and other Democrats have sought to extend the reductions for married couples’ income up to $250,000 a year while letting tax rates rise for income above that amount. Republicans oppose tax rate increases for any income level.

“The sticking point appears to be a willingness or interest or frankly, the courage to close the deal,” McConnell said on the Senate floor. “I’m willing to get this done, but I need a dance partner.”

Illinois Senator Dick Durbin, the second-ranking Democrat, said unresolved issues include the income threshold at which tax rates would rise, expiring estate tax levels and how to prevent an expansion of the alternative-minimum tax.

Durbin also said there is a debate over raising the rate for capital gains and dividends from 15 percent to 20 percent. The issue is at what income level the rate would jump to the higher percentage, he said.

Medicare Payments

Lawmakers haven’t said whether any deal would include provisions to halt a cut in Medicare payments to doctors.

Several Republicans said yesterday they might be willing to accept an income tax threshold of $500,000, slightly higher than the $400,000 Obama offered to Boehner on Dec. 17.

“People are coming around to about a $500,000 threshold,” Senator Kay Bailey Hutchison, a Texas Republican, told reporters.

Biden and McConnell spoke by phone at least twice yesterday, according to McConnell. The vice president led talks in 2011 over raising the federal debt ceiling.

House Speaker John Boehner, an Ohio Republican, brought his members back to Washington Sunday, though he has said the House won’t act unless the Senate sends over a proposal.

“We’re waiting to see if the Senate does anything,” said Representative Buck McKeon, a California Republican.

During an interview broadcast yesterday on NBC’s “Meet the Press,” Obama made a last-minute appeal for compromise and warned of “an adverse reaction in the markets” if Congress doesn’t act.

Wealthiest Americans

Republicans “say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they’re behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected,” Obama said. He said his offers to Republicans have been “so fair that a lot of Democrats get mad at me.”

In a statement, Boehner called Obama’s comments “ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party.”

The Reid-McConnell talks broke down publicly with both leaders coming to the floor to express frustration at the lack of progress.

Reid attributed the setback to a Republican insistence on using a new inflation measure that would lead to smaller Social Security cost-of-living increases. Republicans later said they had stopped advocating the formula change.

Tax Breaks

“It’s not a winning argument to say benefits for seniors versus tax breaks for rich people,” Senator John McCain of Arizona told reporters.

The dispute over Social Security followed 24 hours of progress toward a deal, according to a Democratic aide familiar with the talks. During the previous two days, Reid and McConnell had been closing in on agreement on a threshold for letting income tax rates increase for top earners and narrowing differences over the estate tax, the aide said.

Several Senate Republicans leaving yesterday’s caucus meeting said McConnell told them the talks stalled because Obama insists on using revenue generated from higher tax rates on the wealthy to reduce the spending cuts scheduled to begin in January.

Senator Bob Corker, a Tennessee Republican, said new revenue should go instead to deficit reduction. Democrats “want to spend it all now,” he said.

Failed Talks

Democrats have said for more than a year that new revenue should be used to turn off the spending cuts. That was the basis of their proposals in last year’s failed talks by a deficit- reduction supercommittee.

Even if McConnell and Reid do strike an accord, getting it through both congressional chambers in time to meet the year-end deadline would be difficult.

Under Senate rules, unanimous consent in the 100-member chamber is needed to move ahead with an expedited vote. The objection of a single senator could stall action. In the House, Boehner will likely need to rely on a mix of Democratic and Republican votes to pass any bipartisan Senate legislation.

Boehner may be hesitant to work with Democrats to advance a measure that raises taxes just days before he has to stand for re-election as speaker in the next Congress.

In the event the Senate can’t reach a compromise, Obama has asked Reid to ready a bare-bones bill for a vote Monday to extend expanded unemployment benefits and tax cuts on family income up to $250,000.

‘Block It’

In that scenario, Obama said on NBC, “Republicans will have to decide if they’re going to block it, which will mean that middle-class taxes do go up.” Any compromise needs to be passed by the Republican-controlled House.

Sunday marked the first time since Oct. 29, 2000, that both the House and Senate held votes on a Sunday, according to congressional records. The House has met on 16 Sundays since World War II, according to records of the House clerk and historian’s offices.

South Carolina Senator Lindsey Graham, a Republican, said he had discussed the effect of spending cuts on the U.S. military with Defense Secretary Leon Panetta and was told that it would mean 800,000 layoff notices at the beginning of the year. The result would be destroying “the finest military in the world at the time we need it the most,” Graham said.

Average $3,446

If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington.

Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office.

The effects of the higher tax rates and federal spending cuts would accumulate over a matter of months. Congress could reverse them by acting retroactively in 2013.