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US Senate passes key deal to avoid tax rises US Senate passes key deal to avoid tax rises
(35 minutes later)
The US Senate has approved a deal on taxes in an effort to avert the "fiscal cliff" - as the combination of tax hikes and spending cuts is known. The US Senate has approved a deal on avert a combination of tax hikes and spending cuts known the "fiscal cliff".
The bill to raise taxes for the wealthy came after lengthy talks between the vice-president and Senate Republicans. The bill, which raises taxes for the wealthy, came after lengthy talks between Vice-President Joe Biden and Senate Republicans.
The House of Representatives is due to consider the bill later. It needs the approval of both houses to become law. The House is due to consider it later. Spending cuts have been delayed for two months to allow a wider agreement.
Congress missed the deadline to approve it, but Tuesday is a US public holiday and no immediate effects will be felt. Congress missed the deadline to pass the legislation, but no effects will be felt as Tuesday is a US public holiday.
Tax cuts passed during the presidency of George W Bush formally expired at midnight (05:00 GMT).Tax cuts passed during the presidency of George W Bush formally expired at midnight (05:00 GMT).
But the deal extends the tax cuts for Americans earning under $400,000 (£246,000) - up from the $250,000 level Democrats had originally sought. But the deal reached on Monday extends the tax cuts for Americans earning under $400,000 (£246,000) - up from the $250,000 level Democrats had originally sought.
A huge spending cut known as the sequester - that would see $1.2tn cut from the federal budget over 10 years - has been deferred for two months, allowing Congress and the White House to reopen negotiations on a wider deal. A huge spending cut that would see $1.2tn cut from the federal budget over 10 years has been deferred for two months, allowing Congress and the White House to reopen negotiations.
Analysts said if the full effects of the fiscal cliff were allowed to take hold, the resulting reduction in consumer spending could spark a new recession.