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WASHINGTON: US President Barack Obama said yesterday that a deal with Congress to avoid the US “fiscal cliff,” with its tax increases looming at midnight, was close, but he warned that it was not yet complete.
“Today it appears that an agreement to prevent this New Year’s tax hike is within sight, but it is not done,” Obama said during remarks at the White House complex. “There are still issues left to resolve, but we’re hopeful that Congress can get it done, but it’s not done.”
The president made his remarks surrounded by cheering supporters identified as “middle class Americans.”
Obama, who won re-election in November partially on a promise to raise tax rates for the top two percent of US earners, said the deal would ensure that taxes do not go up for middle income families. He stressed that it would include an extension of unemployment benefits for the long-term jobless and extension of popular tax credits.
Obama said the agreement being worked out with Republican leaders in Congress would not include a long-term solution to the government’s debt problem.
“My preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it that solves our deficit problems in a balanced and responsible way,” he said.
“But with this Congress that was obviously a little too much to hope for at this time. Maybe we can do it in stages. We’re going to solve this problem instead in several steps.”
The outlines of a deal in the US Senate include raising income tax rates for individuals making more than $400,000 a year and households making more than $450,000 a year, but a sticking point remains on how long to delay automatic spending cuts to defense and domestic programs, known as a “sequester.”
Obama stressed that a deal over those spending cuts had to include revenue. “Any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced,” he said.
“That means that revenues have to be part of the equation in turning off the sequester, in eliminating these automatic spending cuts, as well as spending cuts.”
The same would be true for any future deficit-cutting agreement, he said. As he often stresses, Obama said deficit reduction would have to follow the principle of not hurting senior citizens, students, or middle class families.
“If we’re going to be serious about deficit reduction and debt reduction, then it’s going to have to be a matter of shared sacrifice, at least as long as I’m president, and I’m going to be president for the next four years,” he said.
A source said the Senate deal would permanently fix the alternative minimum tax and postpone for an undetermined period the automatic, across-the-board federal spending cuts in defense and domestic programs.
The estate tax on inherited assets would increase under the Senate proposal. Corporate tax benefits would be extended, including the research and development tax credit, and unemployment insurance benefits for the long-term jobless would be extended for a year, the source said.
Dividends and capital gains would be taxed at 23.8 percent for high-income households under the Senate package. That would be an increase from the existing rate of 15 percent. At midnight, low tax rates enacted under former president George W Bush in 2001 and 2003 are set to expire.