Republican leaders relent on tax hike for wealthy
REPUBLICANS were under mounting pressure from within their own ranks last night to allow US President Barack Obama to raise taxes on wealthy Americans to stop the US going over the "fiscal cliff".
Bob Corker, a senator for Tennessee, said Republican leaders should acknowledge their weak hand in the negotiations to avert across-the-board tax increases and deep cuts to public spending from January 1.
"There is a growing group of folks that are looking at this and realising that we don't have a lot of cards on the tax issue before year-end," he said.
Economists have warned that the combination of higher taxes on all American households and $600bn (€465bn) of cuts to government spending could throw the country back into recession.
Mr Obama said he will not sign a deal without raising the top 35pc tax rate, but has signalled that he would be willing to compromise at 37pc rather than his original figure of 39pc.
Mr Corker urged Republican negotiators to accept this in return for deeper cuts to programmes such as Medicare, the health care scheme for elderly Americans.
"A lot of people are putting forth a theory, and I actually think it has merit, where you go ahead and give the president the 2pc increase that he is talking about, and all of a sudden the shift goes back to entitlements," he said.
Mr Corker became the fourth Republican senator to warn that the party must strike a deal or risk being seen as holding the economy hostage in order to protect the richest Americans.
Mr Obama, who won re-election after campaigning relentlessly on a promise to raise taxes for households earning more than $250,000 (€195,000) a year, has asked for $1.6 trillion in new tax revenue over the next decade to help reduce America's annual trillion-dollar budget deficit.
In an indication of a possible shift towards a compromise, on Friday Mr Boehner declined to rule out a 37pc tax rate.
"There are a lot of things that are possible to put the revenue the president seeks on the table," he said.
Tom Cole, a Republican representative for Oklahoma, said yesterday that party leaders needed to recognise that Mr Obama had the stronger hand because taxes would rise on January 1 even if no deal was struck.
"Some of our people think if we dig in and hold strong we can stop it, but that's not the case," Mr Cole said.
"It happens automatically," he added. (© Daily Telegraph, London)