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(Agencies)
Updated: 2008-01-24 23:47

Washington -- US Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of US$300 to US$1,200 per family and business tax cuts to jolt the slumping economy.

US President Bush, second from right, meets with Congressional leaders to discuss the economy, January 22, 2008, in the Cabinet Room of the White House in Washington. From left are, House Minority Leader John Boehner of Ohio, House Speaker Nancy Pelosi of Calif., the president and Senate Majority Leader Harry Reid of Nev. [Agencies]

US congressional officials close to the negotiations said House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio reached agreement in principle in a telephone call Thursday morning.

The officials, speaking on condition of anonymity, said the two wanted key members of their parties to sign off on the accord before any announcement.

The movement came as the White House said agreement seemed imminent. "Our understanding is there is no final deal yet but they are making progress," presidential spokeswoman Dana Perino said early Thursday.

Pelosi, D-Calif., agreed to drop increases in food stamp and unemployment benefits during a Wednesday meeting in exchange for gaining rebates of at least US$300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes.

Families with children would receive an additional US$300 per child, subject to an overall cap of perhaps US$1,200, according to a senior House aide who outlined the deal on condition of anonymity in advance of formal adoption of the whole package. Rebates would go to people earning below a certain income cap, likely individuals earning US$75,000 or less and couples with incomes of US$150,000 or less.

Another element of the plan is a package of tax breaks for businesses that could cost as much as US$70 billion, far more than had been expected, a senior House aide and a Democratic lobbyist said.

The business tax portion would give businesses incentives to invest in plants and equipment, give small businesses more generous expensing rules, and allow businesses suffering losses now to reclaim taxes previously paid.

After a key Wednesday night meeting in which the parameters of an agreement were reached, Pelosi and Boehner spoke again Thursday to cement the accord.

In the talks, Pelosi pressed to make sure tax relief would find its way into the hands of lower-income earners while Boehner pushed to include upper middle-class couples, according to congressional aides.