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Obama announces tax cuts agreement

US president Barack Obama has brushed aside opposition in his own party and announced an agreement with Republicans on a plan to extend expiring income tax cuts for all Americans, renew jobless benefits for the long-term unemployed and grant a one-year reduction in payroll taxes.

The emerging agreement also included tax breaks for businesses that the president said would contribute to the economy's recovery from the worst recession in 80 years.

The debate over extending the Bush-era tax cuts has been the dominant political issue in Washington during the final weeks of the current session of Congress in which Democrats have big majorities in both chambers.

The agreement signalled the arrival of a new era of divided government following the November elections in which Republicans won control of the House of Representatives and cut into the Democrats' Senate majority.

Mr Obama's announcement marked a dramatic reversal of his long-held insistence, originally laid out in his 2008 campaign, that tax cuts should only be extended at incomes up to 200,000 dollars (£127,300) for individuals and 250,000 dollars (£159,200) for couples.

He explained his about-face by saying that he still opposed the move and noted that the agreement called for a temporary, two-year extension of cuts at all income levels, not the permanent renewal that Republicans had long sought.

Mr Obama also wanted to wrap up a deal on the tax cuts quickly to leave time for the Senate to debate and vote on a new nuclear arms control treaty with Russia, which the president has made a top year-end priority.

Senate Republicans have seemed more willing to hold a ratification debate in recent days as the negotiations over taxes intensified, suggesting at least an implicit link between the two issues in the talks.

Both parties have been under pressure from their bases not to compromise on the tax cut issue. Republicans insist that it makes no sense to raise taxes on anyone in a weak economy, but Democrats argue that extending tax cuts for the richest Americans would contribute to rising deficits and force deeper cuts in social welfare programmes.

Mr Obama found himself under fire from liberal Democrats who accused him of being too quick to cave in to Republican demands.

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From Belfast Telegraph