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US Fiscal Cliff Averted As Bill Approved
A "fiscal cliff" of massive tax hikes and drastic spending cuts in the US has been avoided at the 11th hour.
The House of Representatives voted to approve a bill which averts tax increases for the middle classes - and the possibility of sending the country into recession.
The bill - which also stops massive spending cuts - was approved by 257 votes to 167 after being supported earlier by the Senate.
President Barack Obama welcomed the deal and said it was just one step in a broader effort to strengthen the economy.
He said: "Thanks to the votes of Republicans and Democrats in Congress I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing tax hikes that could have sent the economy back into recession."
The vote came just hours before financial markets reopen following the New Year holiday. In early trading on Wednesday Asian markets were up over 2%.
Some House Republicans had wanted to amend the bill to incorporate more spending cuts, but they dropped the idea.
In the end, 172 Democrats and 85 Republicans voted in favour of the bill.
It marks a political triumph for President Obama, less than two months after he secured re-election while campaigning for higher taxes on the wealthy.
The legislation cleared the Senate hours after Vice President Joe Biden and Senate Republican Leader Mitch McConnell, veteran negotiators, sealed a deal.
The spending cuts and drastic tax increases which made up the so-called "fiscal cliff" were due to come into effect at midnight on Monday when George Bush-era tax cuts expired.
The deadline would have triggered tax increases of $536bn (£328bn) and spending cuts of $109bn (£67bn) from domestic and military programmes.
The compromise Senate deal extends the tax cuts for Americans earning under $400,000 (£246,000) - up from the $250,000 (£153,000) level that Democrats had originally sought.
However, the overall Federal tax liability for millions of middle and lower income families will still go up, despite the deal.
A two percentage point temporary cut in the Social Security payroll tax expired with the end of 2012, with neither President Obama nor the Republicans making a significant effort to extend it.
Within minutes of speaking at the White House, President Obama headed back to Hawaii to rejoin his family on holiday.
But his break from the political manoeuvring will be brief.
Another standoff is likely to arrive as early as February, when the new Congress will be asked to agree to raise the $16.4trn federal borrowing limit, so the government can keep paying its bills.
House Republicans are unlikely to agree to raise the debt limit without pushing spending cuts that Democrats and Mr Obama are sure to resist.