Democrats' jobs, fund manager tax bill delayed

People wait in line to enter the City University of New York (CUNY) Big Apple job fair in New York April 23, 2010.

WASHINGTON (Reuters) - Democrats in Congress are racing against the clock to renew unemployment benefits for hundreds of thousands of jobless Americans in legislation that also raises taxes on investment-fund managers and multinational companies.

With the benefits to expire at the end of this month, the House of Representatives delayed a vote on the $134 billion bill amid pushback from fiscally conservative Democrats concerned about the bill's new taxes and cost.

And some House Democrats are reluctant to support a bill that may still not have enough backing to pass the Senate, according to congressional sources. The House could vote on the measure on Wednesday at the earliest, leaving little time for the Senate to act before the benefits expire.

House Democratic Leader Steny Hoyer said he expected the chamber to pass the measure later this week. "I think we'll have the votes," Hoyer said at a news conference. Pressed for a clarification, he said: "We'll have the votes."

Senate Majority Leader Harry Reid has threatened to hold that chamber in session through the weekend to ensure the bill passes before a week-long break.

"We must pass the new jobs bill this week, in the next few days," he said at a news conference.

House Ways and Means Committee Chairman Sandy Levin told reporters he was not likely to scale back the cost of the bill to allay concerns about its effect on the federal deficit.

"It's up to this institution to step up to the plate, knowing that issues today aren't easy," Levin said.

But several Senate Democrats said cuts were possible.

"People are looking at everything at this point," said Democratic Senator Debbie Stabenow.

OBAMA MEETS WITH REPUBLICANS

The measure's prospects appeared less certain in the Senate. President Barack Obama met on Tuesday with Senate Republicans on Capitol Hill in a bid to pick up at least a few of their votes.

Republicans have almost unanimously opposed Democrats' other job-creation measures, and have delayed similar bills on the grounds that they add to the budget deficit.

The bill pairs unemployment benefits with construction incentives and other job-creation measures with a politically popular package of tax breaks, such as a credit for research and development costs, that expired at the end of last year.

One of the most controversial aspects of the bill increases taxes on fund managers in private equity and other firms from the current 15 percent to at least 35 percent.

Private equity and real estate interests are lobbying heavily to kill that part of the bill, which raises about $20 billion over a decade. From the other end of the political spectrum, the labor giant AFL-CIO said passage of the bill is a top priority and it will press incumbent House Democrats to support it.

The legislation also tightens tax rules for multinational companies and oil companies in particular.

The bill's $174 billion in new spending is offset by $40 billion in new taxes, according to the nonpartisan Congressional Budget Office. Jobless benefits, COBRA health subsidies for the unemployed and health-care subsidies to states account for $79 billion in spending.

Centrist lawmakers who hold the balance of power in the Senate said they are concerned by the price tag.

Republican Senator Olympia Snowe said more of the bill's costs need to be funded without adding to the deficit. Democratic Senator Ben Nelson said he might vote against it.

"It's a large number, and it's an uncomfortable number," Nelson said of the $134 billion the bill would add to the deficit over 10 years.

The U.S. government posted a record $1.4 trillion budget deficit last fiscal year and could exceed that this year as the country digs out from the worst recession since the 1930s.

Democrats say last year's $863 billion stimulus package has created millions of jobs and helped keep the 9.9 percent unemployment rate from rising.

But with voter concerns about federal spending on the rise ahead of the November congressional elections, lawmakers have shown little appetite for another ambitious jobs package.

So far this year, Congress has only sent Obama one jobs bill to sign into law: a modest $15 billion package centered on a payroll tax cut for companies that hire unemployed workers.

(Editing by Vicki Allen and Todd Eastham)