In a blow to US President Barack Obama, his Democratic allies in the House of Representatives voted yesterday to reject a compromise he reached with Republicans to avert a massive New Year’s tax hike.

Despite an unrelenting White House charm offensive, House Democrats declared behind closed doors, by voice vote, that the framework deal was unacceptable in its current form, ensuring it could not pass this year absent key changes.

“We will continue discussions with the President and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote,” said Democratic House Speaker Nancy Pelosi.

At the White House, spokesman Robert Gibbs played down the rejection, saying the President shared some of his allies’ concerns, but predicted “I think at the end of the day this will get done”.

“If everybody took out what they didn’t like, we would have nothing. And we know the consequences of doing nothing,” he said, referring to the political price of letting taxes rise on all Americans come January 1.

Shortly before the vote, Mr Obama warned that if lawmakers defeat the accord, “Americans will see it in smaller pay cheques that will have the effect of fewer jobs” and urged approval of “this essential priority”.

In the deal, Mr Obama agreed to extend tax cuts for the richest sliver of US earners for two years in return for doing the same for the middle-class while extending unemployment benefits for 13 months.

Many Democrats denounced the planned extension on income over $250,000 for families and 200,000 for individuals as well as the way the deal rolls back the US estate tax on all but a tiny number of the very richest Americans, saying those funds could go to reduce the deficit. In the US Senate, Democrats planned to introduce their own Bill later in the day, including “some changes” to the compromise Mr Obama reached with Republicans, according to a senior aide, who did not elaborate.

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