Obama calls for tax cut extension

US President Barack Obama called on Congress today to approve an extension of tax cuts for most Americans, but not the top income earners.

"Under my plan, 98 per cent of American families won't see their income taxes go up at all," Obama said in his weekly radio and Internet address.

"But the other two per cent of Americans will have to pay a little more in taxes on anything they make over USD 250,000," the president continued. "In other words, the wealthiest few Americans will go back to the income tax rates they were paying under Bill Clinton."

The comment came as a political fight between congressional Democrats and Republicans over future taxes began to heat up.

On January 1, a tax cut adopted under former president George W Bush and extended under Obama is set to expire. But Democrats and Republicans strongly disagree over how to extend it.

While Obama favors higher taxes for the rich, Republicans argue it would undercut the nation's fragile economic recovery.

In his address, Obama argued that if the tax cut is allowed to expire, it "would be a huge financial hit for middle-class families."

But he rejected the notion favored by Republicana that wealth accumulated at the top will eventually trickle down and help create jobs for middle-class Americans.

"We already tried it that way for most of the last decade, and it didn't work," the president argued.

He said the country needed policies that will grow and strengthen the middle class, will help create jobs and make education and training more affordable.

But Republicans again rejected the president's approach.

Delivering a weekly Republican address, US Senator Rob Portman of Ohio said Obama's plan will result in a massive tax increase on nearly one million small businesses.

"And raising taxes on job creators during a jobs shortage makes about as much sense as cutting off the water supply during a drought," Portman said.

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