Obama passes tax cuts with Republican backing

US President Barack Obama on Friday signed into law a bill extending Bush-era tax cuts and said he hoped the bipartisan spirit that had made it possible would help restore America's faith in Washington.

The huge tax package extends cuts for all Americans, saluting a new spirit of political compromise as Republicans applauded and liberals seethed. The benefits range from tax cuts for millionaires and the middle class to longer-term help for the jobless.

The most significant tax legislation in nearly a decade will avert big increases that would have hit millions of people two weeks after New Year's Day. "We are here with some good news for the American people this holiday season,'' Obama said.

"This is progress, and that's what they sent us here to achieve,'' Obama said as a rare bipartisan assembly of lawmakers looked on at the White House.

The package retains the George W Bush-era tax rates for all taxpayers, including the wealthiest Americans, a provision Obama and congressional liberals opposed. It also offers 13 months of extended benefits to the unemployed and attempts to stimulate the economy with a social security payroll tax cut for all workers.

To complete the deal, Obama set aside his vow to extend tax cuts only for the middle class and lower wage earners. The measure also includes an estate tax that is more generous to the wealthy than Obama had originally sought.