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US Congress edges towards tax rate deal

Bbc.Co.Uk
Wednesday, January 02, 2013

US politicians seeking a deal to avoid steep tax rises and spending cuts known as the "fiscal cliff" are edging towards agreement, reports say.

Democrats are said to have offered to extend tax cuts on couples earning up to $US450,000 ($F797,844). But divisions remain over spending cuts.

At a news conference, President Barack Obama said a deal was "within sight" but not yet done.

Failure to reach agreement by January 1 could push the US back into recession. Any deal needs to pass the 100-member Senate, which is controlled by Democrats, before heading to the House of Representatives, where Republicans hold the majority.

Mitch McConnell, leader of the Senate's Republican minority, and Vice-President Joe Biden held "good" talks late into Sunday evening, a spokesman for Mr McConnell said.

Agreeing to a $US450,000 ($F797,844) threshold — $US400,000 ($F709,104) for couples — would be a notable compromise by Democrats, analysts say.

The party previously only wanted tax rate extensions for earnings under $US200,000 ($F354,597) for individuals and $US250,000 ($F443,246) for couples.

But after weeks of increasingly desperate horse trading and public pronouncements, the "contours" of a deal were said to be emerging just hours before the midnight deadline.

Inheritance tax rates and the continuation of unemployment benefits were also part of the deal-making, reports said, but disagreements remained over how to deal with the automatic spending cuts due to kick in on January 1.