US Senate passes $858 billion tax cut bill

A deal that President Barack Obama struck with Republicans to extend expiring tax cuts for nearly every working American and spur job growth sailed through the US Senate on Wednesday.

Senators voted 81 to 19 to pass the bill, with Republicans and Democrats backing the tax breaks in a rare show of bipartisan support.

The drama now moves to the House of Representatives, where many of Obama's fellow Democrats are still angry with him for cutting the deal with Republicans without them.

Still, most House Republicans are expected to back the bill and Democrats in that chamber are becoming more resigned to passage of the $858 billion package, which is expected to boost economic growth next year but add to the budget deficit.

"At the end of the day I think we are going to have to pass a bill," said liberal Representative Henry Waxman.

The House could start debate on the bill as early as Wednesday.

The plan extends for two years all Bush-era individual tax rates, prevents a spike in taxes on capital gains and dividends and renews long-term jobless insurance, while providing new tax relief for students, working families and businesses.

Obama, whose party lost ground to the Republicans in November's mid-term elections, tried to make up with the business community at a meeting with some 20 top CEOs on Wednesday.

He was expected to ask them to invest and hire more to help boost economic growth.

The deal in the Senate leaves out renewal of a popular bond program expiring this month, Build America Bonds, which funds infrastructure projects, favored by Democrats, cities and investors. It also leaves intact an ethanol tax credit, thwarting efforts by some lawmakers to weaken it.

Many economists predict the tax package could boost growth by up to 1 percentage point next year, citing in particular a one-year cut in the payroll tax and removal of uncertainty about taxes in general.

But deficit hawks warn that the tax bill deepens the nearly USD 14 trillion federal debt.

Worries about the bill's potential impact on the federal deficit prompted a two-day sell-off of US treasury bonds last week. On Wednesday treasuries prices rose after recent price declines lured buyers.