Last gasp

US President Barack Obama (right) and House Speaker John Boehner shake hands following talks on the US fiscal cliff.

WASHINGTON — As the pace of talks quickened to avert the fiscal cliff of steep tax hikes and spending cuts set for the end of the year, senior members of the US House of Representatives of both parties cautioned that an agreement on all the outstanding issues remained uncertain.

Republicans and Democrats are not close to “finishing anything”, California Representative Kevin McCarthy, the Republican whip in the House, told Fox News last night.

“There’s nothing agreed to. They are just beginning to talk,” he said of House Speaker John Boehner and President Barack Obama.

Meanwhile, Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said on MSNBC Monday he thought Congress could resolve some of the issues by the December 31 deadline – among them the hikes in tax rates-but might have to leave others for the new Congress that takes office in January.

The two major elements of the so-called cliff are automatic spending reductions set to occur starting January 1 and tax cuts that expire at the end of the year. Democrats, including Obama, want the reduced taxes extended for all but the highest earners, while Republicans want them continued for all brackets.

Also in the mix is a payroll tax “holiday” set to expire, which, if not extended, will could quickly reduce the take-home pay of a large segment of the US workforce.

The holiday, now in its second year, has been providing workers with an average of about $1,000 a year in extra cash. Significant divisions remain on the payroll tax question in part because it funds the Social Security retirement programme.

The payroll tax, dedicated to financing Social Security, is paid by employers and employees at a rate of 6.2 per cent of wages up to a maximum of $110,110. The holiday, enacted in 2010, reduced the rate by two percentage points on the portion paid by the worker. (Reuters)

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