UPDATE: House Opens Debate On Bill To Tax Wall Street Bonuses

The U.S. House of Representatives began debate Thursday on a bill that would tax at 90% bonuses at Wall Street firms that received federal bailout funds.

The House is expected to pass the bill later in the afternoon. The Senate won't take up its own legislation on tax bonuses until next week, according to Senate Finance Committee Chairman Max Baucus, D-Mont.

"We're not trying to punish anybody," said House Ways and Means Committee Chairman Charles Rangel, D-N.Y. "Rewards are subjective, but you don't do it with taxpayers' money."

The House bill would affect bonuses paid by firms that received more than $5 billion from the Troubled Asset Relief Program, plus Fannie Mae (FNM) and Freddie Mac (FRE). The House bill is being considered under special rules meant to expedite legislation, which require a two-thirds vote of members present.

It comes as lawmakers continue to press insurance giant AIG (AIG) for the names of employees who were paid $165 million in bonuses last week.

The House rejected a Republican alternative that would have directed the Treasury Secretary to develop a plan to recover the AIG bonuses. In House floor debate Thursday, Republicans said Congress shouldn't rush to judgment by passing the tax on bonuses.

"I believe this is a gimmick. I don't think this is going to become law," said Rep. Devin Nunes, R-Calif. "What we should do today is calm down, stop this process ... and go through this bill to consider whether this is the right course of action."

Republicans also said the legislation may be unconstitutional. According to talking points distributed by House GOP conservatives, the House bill might be a constitutionally prohibited "bill of attainder," or legislation to punish a specific individual or group of individuals.

Democrats say the bill is not specifically aimed at AIG but is intended to prevent further abuses by bailout companies.

The lack of action this week by the Senate raises questions about how quickly Congress will move ahead with legislation on the bonuses.

The Senate bill is much broader than the House version - taxing bonuses at any company that received federal assistance, not just the largest ones. It would tax bonuses at 70%, split evenly between the company paying the bonus and the employee receiving it.

-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones