The US president says that a deal on the “fiscal cliff” is within sight but it was not complete yet, in a bid to prevent America veering towards extensive tax rises and a host of spending cuts.
Democrats are said to have offered to extend tax cuts on couples earning up to $450,000 (£277,000). But divisions remain over how to tackle spending.
Analysts say failure to reach a deal by 1 January could spark a new recession.
Speaking to the press just hours ahead of the midnight deadline for a deal to avert tax rises and spending cuts – the fiscal cliff itself – Barack Obama said: “In the last few days, the leaders of both parties have been working towards an agreement that will prevent a middle-class tax hike from hitting 98 per cent of Americans tomorrow.
“Preventing that tax rise has been my number one priority. The last thing folks can afford is to pay an extra $2,000 in tax a year. People can’t afford it, businesses can’t afford it, our economy can’t afford it.
“Today it appears that an agreement to prevent this New Year tax hike is in sight, but it is not done.
“There are still issues left to resolve but we are hopeful Congress can get it done. But it is not done. Part of the reason I wanted to speak to you all today is to make sure we emphasise to Congress and that members of both parties understand that all across America this is a concern on people’s minds.”
Any deal needs to pass the 100-member Senate, which is controlled by Democrats, before heading to the House of Representatives, where Republicans hold the majority.
Agreeing to a $450,000 threshold ($400,000 for couples) would be a notable compromise by Democrats, analysts say.
The party previously only wanted tax rate extensions for earnings under $200,000 (£123,000) for individuals and $250,000 (£154,000) for couples.
But after weeks of increasingly desperate horse trading and public pronouncements, the “contours” of a deal were said to be emerging just hours before the midnight deadline.
Inheritance tax rates and the continuation of unemployment benefits were also part of the deal-making, reports said, but disagreements remained over how to deal with the automatic spending cuts due to kick in on 1 January.