US & Canada

US Congress backs payroll tax cut

Media playback is unsupported on your device
Media captionPresident Obama: "I want to thank Congress for listening to the voices of the American people"

The US Congress has voted in favour of extending a payroll tax cut until the end of 2012, ending months of debate.

The bill now moves on to President Barack Obama, who has promised to sign it into law.

The deal would extend a payroll tax cut the White House says saves middle-class Americans some $1,000 (£630) a year.

Republicans had demanded that the tax cut be offset by budget cuts elsewhere, but later agreed to add the estimated $100bn cost to the US budget deficit.

Correspondents said the deal was a compromise by fiscally conservative House Republicans, who had fought last December for a deal that did not increase the deficit.

Bipartisan vote

The Senate approved the $143bn measure by a 60-36 vote.

Image caption House Speaker John Boehner earlier lead Republicans in blocking a shorter-term extension

Moments earlier, the House of Representatives passed the bill by a broad 293-132 vote.

The law also extends jobless benefits to people who have been out of work for more than six months, and prevents a significant cut in reimbursements for doctors who treat patients on Medicare, a goverment-sponsored health programme.

The payroll tax debate sparked an impasse in Congress at the end of 2011.

Republicans in the House were put on the defensive as the year drew to a close after negotiations broke down on how to pay for the cut.

After a climbdown by Republican House Speaker John Boehner, Republicans eventually agreed to a two-month extension while a House and Senate panel brokered a year-long deal.

Compromises

Extending the cut, which was originally passed in 2010, was part of a wide-ranging jobs plan launched by President Barack Obama in September 2011.

As part of the year-long deal, Democrats dropped requests for new tax breaks.

Republicans had wanted to reduce the extension of unemployment benefits from 99 weeks to 59 weeks. The White House wanted a 79-week extension as a compromise.

The eventual deal settled on 73 weeks of in states with high unemployment.

The Republicans also dropped a condition that potential recipients of unemployment benefits must be drug-tested first.

More on this story