Obama calls for tax compromise

US president tries to break budget deadlock by calling for interim bill that will stall tax increases on middle-income households

Barack Obama has sought to break the budget deadlock on Capitol Hill by urging Democrats and Republicans to draft an interim bill that will prevent an immediate increase in taxes on middle-income households.

Before arriving at his holiday retreat in Hawaii, the US president said it was sensible to give the debate breathing space before a comprehensive plan was hammered out.

In comments that signalled that the White House is coming to the conclusion that an over-arching, grand compromise is slipping from its grasp, Obama issued a statement tempering ambitions for a comprehensive deal to avert punitive tax rises and swingeing spending cuts.

The president’s stance also appeared to be in response to some prominent former Democrat advisers, who have argued vociferously against the new administration in Washington using its mandate in the recent elections to win short-term advantage during budget talks. Obama said he remained “ready and willing” to put his name to such an agreement.

Without a deal, a raft of time-limited tax breaks put in place by former president George W Bush and extended by Obama will end, hitting middle- and upper-income earners.

Last week, John Boehner, leader of the lower House of Representatives, was forced to withdraw a bill aimed at pushing his version of a short-term fix to the growing crisis. It was defeated in the House after a revolt from mainly Tea party-backed Republicans, who oppose any tax rises on individuals.

The president had initially been pushing a plan that would have seen tax revenues rise by $1.6tn over the next decade, with an increase in the rate for those earning more than $250,000 a year central to proposals.

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