December 15, 2011 by staff
Funding for federal programmes expires at the end of the week, but Democrats insist they will not pass a funding bill without solving the tax impasse.
Democrats, who control the Senate, have dropped demands to fund the renewed tax cut with a surcharge on millionaires.
But they object to Republicans linking the tax to an oil pipeline project.
Republicans want the government to approve the Keystone XL pipeline linking Canada with the US Gulf Coast. They say it will create jobs and boost US trade.
The Obama administration has ordered an environmental review of that project, with results not expected until 2013.
The payroll tax cut is due to expire at the end of December, with the White House estimating that taxes would rise for about 160 million Americans if it is not renewed.
The administration says a family earning $50,000 (£32,000) would pay $1,000 more in payroll taxes next year if Congress does not act.
President Obama has been vocal about the tax issue in recent weeks, challenging Republicans who espouse a low-tax philosophy to agree with his policy.
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