20 December 2012 Last updated at 17:23 ET
The Republican-led US House is set to vote on a package of spending cuts and tax rises party leaders say will keep the US away from the “fiscal cliff”.
The vote includes tax rises on earnings above $ 1m (£614,000) on Speaker John Boehner’s so-called “Plan B” option.
It comes as talks with the White House appear to have stalled, with President Barack Obama seeking a lower threshold.
A deal must be reached by 1 January, or a combination of steep tax rises and sharp spending cuts will take effect.
Analysts in the US and overseas have expressed concern that failure to reach a deal could take the US into recession.
Veto threat
A vote is expected by the late afternoon on Thursday, but could stretch on into the evening.
House Majority Leader Eric Cantor said on Thursday: “We, as Republicans, have taken concrete actions to avoid the fiscal cliff.”
He and Mr Boehner say the bill as proposed would ensure permanent tax cuts for 99.8% of Americans.
What is the fiscal cliff?
- On 1 January 2013, a series of tax increases and huge spending cuts are due to come into force – the so-called fiscal cliff
- The deadline was put in place in 2011 as a means of forcing the president and Congress to agree on ways to save money over the next 10 years
- If they can reach a deal before 1 January, the cliff will be averted
- The fear is that raising taxes while massively cutting spending will have a huge impact on households and businesses
- Experts believe it could push the US into recession, and have a global impact on growth, especially in China and Europe
But Mr Cantor added that Republicans would not be sending their members home for the Christmas recess after the vote – a sign that Congress could be expected to vote on a more bipartisan deal within days.
Correspondents say the Republican plan has no chance of passing the Democratic-led Senate, and is in effect an effort to tell the US public that they should not be blamed if the US falls over the fiscal cliff.
The White House has threatened to veto the legislation if does pass Congress, saying the bill would mean tax rises on 25 million Americans making under $ 250,000.
A study by the non-partisan Tax Policy Center found some low-income people would see tax rises because the measure would not renew several tax cuts that were part of the 2009 stimulus package.
On Thursday, the White House criticised Republicans, saying Mr Boehner’s response to compromises from the president was “to walk away” from negotiations.
Spokesman Jay Carney said the introduction of Mr Boehner’s so-called Plan B was a “multi-day exercise in futility at a time when we do not have the luxury of exercises in futility”.
‘Partisan war paint’
Mr Boehner announced the bill on Tuesday, saying he would bring forward a measure that extended Bush-era tax cuts for those earning less than $ 1m per year – but would not address the automatic spending cuts.
Correspondents say the move came as a surprise as negotiations appeared to be making progress.
On Wednesday, the Republican leadership added a companion bill that would replace the automatic cuts with a proposal to remove cuts from defence and government operating budgets. They would be offset by reductions elsewhere in the budget.
“Start Quote
It is positioning, theatrics, part of the negotiations, not the negotiations themselves. There are still few days left, and many think a deal will be done, because it has to be done”
End Quote
The proposal would cut food stamps, benefits for federal workers and some social services programmes.
On Wednesday, Mr Obama dismissed the bill, telling reporters that he and Mr Boehner were just a few hundred billion dollars apart on full 10-year deal.
The president said Republicans should “peel off the partisan war paint” and take his most recent offer.
Mr Obama is now proposing a tax rise on incomes over $ 400,000 (£247,000), an increase on the $ 250,000 level he had originally sought.
He also offered a change to the way Social Security cost of living adjustments are made for some recipients, cuts from government healthcare programmes and a two-year extension of the debt ceiling.
Mr Boehner’s office called the proposal “a step in the right direction” but not fully “balanced”.
In a brief news conference on Wednesday, the House Speaker countered that the president will bear responsibility for “the largest tax increase in history” if he does veto the bill.
But Senate leaders have signalled there is little hope for the measure in Congress’ upper-chamber.
Senate Majority Leader Harry Reid has said the proposal would not pass and that lawmakers would return to Washington next Thursday to continue working on a deal.
Analysts have painted a grim picture of the consequences of going over the cliff, with some warning that the impact could push the US back into recession.
The Organization for Economic Co-operation and Development (OECD) said in its latest economic outlook that the recession from the cliff could become global.
Changing taxation across the years | ||||||||
|---|---|---|---|---|---|---|---|---|
| Tax year | 1993-2000 | 2001 | 2002 | 2003-2008 | 2009-2012 | 2012 tax brackets | 2013 scenarios | |
Source: Tax Foundation, IRS Tax brackets shown for unmarried individuals | ||||||||
President |  Bill Clinton |  George W Bush |  Barack Obama | Tax cuts expire | Tax cuts expire for top incomes | |||
Bottom rate | 15% | 15% | 10% | 10% | 10% | Up to $ 8,700 | 15% | 10% |
15% | 15% | 15% | $ 8,700-$ 35,350 | 15% | ||||
28% | 27.5% | 27% | 25% | 25% | $ 35,350- $ 85,650 | 28% | 25% | |
31% | 30.5% | 30% | 28% | 28% | $ 85,650- $ 178,650 | 31% | 28% | |
36% | 35.5% | 35% | 33% | 33% | $ 178,650-$ 388,350 | 36% | 33% | |
36% | ||||||||
Top rate | 39.6% | 39.1% | 38.6% | 35% | 35% | Over $ 388,350 | 39.6% | 39.6% |
BBC News – Business
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