Democrats in the US House of Representatives have rejected a tax cut deal struck by President Barack Obama with the Republican opposition.
The non-binding vote on Thursday was led by liberals angry about the extension of tax cuts for the rich.
The White House spent the week lobbying Democrats to back the bill and had appeared to be winning support.
Unless Congress acts, all American taxpayers face a big rise in their tax bill beginning in January and unemployment payments will end for millions.
"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," Speaker Nancy Pelosi said.
The BBC reports that unless the House changes course under an intense dose of White House lobbying, the decision sends White House and Republican negotiators back to the drawing-board.
The debate comes as the current "lame duck" session winds down.
At issue is the extension of low tax rates - enacted by President George Bush and the Republican party in 2001 and 2003 - which are due to expire at the end of the year.