US President Barack Obama has invited congressional leaders for talks at the White House in a last-ditch attempt to stop the country sliding over a so-called fiscal cliff.
Republicans and Democrats need to reach a compromise by the end of the year to prevent hundreds of billions of dollars of government spending cuts and tax rises automatically being phased in from 1 January.
Democrats want to allow the tax cuts to expire for the wealthiest Americans, while Republicans want to extend the tax cuts for everyone.
President Barack Obama returned to the White House on Thursday, cutting short a holiday in Hawaii in order to restart negotiations with Congress. He was due to host the White House talks on Friday.
Analysts say failure to find a solution could damage the US and global markets and send the US economy back into recession.
Warning from senior Democrat
The leader of the Senate, Democrat Harry Reid said in a speech on Thursday that it did not seem likely that politicians would reach a budget deal before the end-of-year deadline.
Mr Reid called on Republicans, who control the House of Representatives, to prevent the worst of the fiscal shock by supporting a Senate bill to extend existing tax cuts for all except those households earning more than $US250,000 a year, Reuters reports.
House Speaker John Boehner, the top Republican in Congress, failed in a bid to push through his own 'fiscal cliff' solution last week, which would have seen taxes rise only for those earning more than $1 million.
Mr Reid said the House of Representatives was being "operated with a dictatorship of the Speaker" and accused Mr Boehner of delaying action until after he seeks re-election as House Speaker on 3 January.
The House and Senate passed bills months ago reflecting their separate positions on the expiring low tax rates, which were brought in during the administration of the former Republican President George W Bush.