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Controversial funding added to Senate jobs bill

By Tami Luhby, senior writer

NEW YORK (CNNMoney.com) -- The Senate on Tuesday took up a bill to extend federal unemployment benefits, but added two controversial measures that may make it tough for the legislation to pass.

The legislation would push back the deadline to file for federal unemployment benefits through the end of November, as well as extend several business and individual tax provisions through year-end. Congress allowed the jobless benefits deadline to lapse last week while members took a weeklong Memorial Day recess.

On Tuesday, Senate Democrats restored $24.2 billion in Medicaid funding for states, an item that was dropped at the last minute in order to get the bill through the House at the end of May.

But it remains to be seen if the Medicaid money is included in the final package since lawmakers on both sides of the aisle are growing increasingly wary of adding to the federal deficit.

Democratic leaders also further hiked a tax on oil that finances the Oil Spill Liability Trust Fund to 41 cents, up from the 34 cents in the House version. The current tax is 8 cents. The latest proposal is projected to raise $14 billion over 10 years. While Republicans acknowledge the tax should be raised, they blasted their Democratic counterparts for using the money to pay for the legislation.

Even with these changes, the bill will still add $78.7 billion to the deficit over 10 years. The Senate is not expected to vote on the measure until next week, a senior Democratic aide said.

Senate lawmakers also made changes to the so-called carried interest tax, another hot-button topic. It would reduce the proposed tax increase on money paid to managers of hedge funds and investment partnerships.

Investment managers would have to pay income tax -- instead of the much lower capital gains tax -- on half the money they earn in 2011 and 2012. After that, 65% of the funds would be subject to income tax. The House bill would subject 75% of their money to income taxes starting in 2011. The Senate provision would raise $14.5 billion over 10 years.

The Senate version would also give doctors a small boost in their Medicare reimbursement rates for the next two years, instead of just keeping them steady, as in the House version. Physicians saw their federal reimbursement rates plummet by 21% starting June 1, though the Centers for Medicare & Medicaid Services instructed its contractors to delay processing claims for 10 business days.

One provision the Senate did not restore was the65% federal subsidy for COBRA health insurance premiums. So those who lose their jobs after June 1 are not eligible for this assistance. To top of page

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