WASHINGTON -- Senate Republicans have put the brakes on a bonus tax that flew through the House with lightning speed.

Backers say the purpose of the tax measure is for the government to recoup funds given to financial firms bailed out by the government.

But Arizona Sen. Jon Kyl, a Republican, has blocked Democratic efforts in the Senate. Kyl said Democrats are attempting to rush through "hastily crafted legislation" in a "very toxic atmosphere." He said the tax measure could wind up having "unintended consequences."

Still, Senate Democrats say they'll try again next week to take up the tax bill and hope to complete it before April 4. That's when Congress leaves for a two-week spring break.

Meanwhile, American International Group is suing the government in a bid to force it to return more than $300 million in tax payments, a report in the New York Times said.

The payments stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens, the report said.

The lawsuit was filed on Feb. 27.

The Times report said:

"The lawsuit contends in part that the federal government owes AIG nearly $62 million in foreign tax credits related to eight foreign entities, with names like Lumagrove, Laperouse and Foppingadreef, that were set up or controlled by financial products, often through a unit known as Pinestead Holdings.

United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the IRS denied AIG's refund claims in 2008, saying that it had improperly calculated the credits. The IRS has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring.

The remainder of AIG's claim, for $244 million, concerns net operating loss carry-backs, capital loss carry-backs, a general refund claim and claims for refunds of other tax-related payments that AIG says it made to the IRS but are now owed back. The claim also covers $119 million in penalties and interest that AIG says it is due back from the government."

On Friday, the former head of insurance giant AIG asserted that the company under his leadership did not have the type of executive bonus system that has come under harsh criticism across the country.

Hank Greenberg said that is at the center of the company's financial woes, said "absolutely not" when asked about the so-called retention bonuses.

Greenberg, in an interview broadcast Friday on CBS's "The Early Show," said that when he was there, "nobody had a contract, including me. If you didn't do the job, you didn't deserve to be there."

The current head of AIG, Edward Liddy, charged in a congressional appearance Thursday that his predecessors were responsible for the financial problems currently at the company.

CBS said that AIG said in a statement that Greenberg was incorrect in saying he never put in a system of retention bonuses.

Spitzer Blasts AIG Bailout

Former New York Gov. Eliot Spitzer has a few words to say about the fuss over the AIG bonuses: I told you so.

Spitzer battered AIG with charges of corruption long before his own downfall in a prostitution scandal. Now, he's using the AIG scandal to strike his old Sheriff of Wall Street themes.

Spitzer said the AIG bonus issue is "penny ante" compared to the billions of the insurer's bailout money funneled to bad banks. He also said Treasury Secretary Timothy Geithner owes the country an explanation, quickly.

Spitzer told CNN that he probed AIG because of the way it would push boundaries to "gin up returns" with little regard to risk.

The tough talk raises the question about whether Spitzer, who now tends to his family's real estate business, is mounting a comeback bid.

Meanwhile, the blame game has begun among Democrats.

The tale of political intrigue and Democratic infighting could threaten the re-election chances of a top senator and the credibility, if not the career, of one of President Barack Obama's top advisers.

The latest finger-pointing is between Sen. Chris Dodd of Connecticut, the Banking Committee chairman, and Treasury Secretary Timothy Geithner. Dodd, who is facing a tough reelection fight, said he modified a proposal in the bailout bill to rein in bonuses at the request of the White House.

Geithner said his staff merely pointed out that without the change, the government risked being sued by executives in line to get big bonuses from bailout recipients.

Outrage Has Employees Living In Fear

The bonuses paid to AIG executives have turned pillars of a Connecticut community into pariahs and have workers fearing for their safety.

An executive who feared retribution and spoke Friday on condition of anonymity says AIG workers in ritzy Fairfield County are "very, very nervous" about security.

AIG's financial products division is in nearby Wilton. Corporate officials have told employees to avoid sporting the company logo and to travel in pairs at night.

Activists plan to visit the homes of AIG executives Saturday in an attempt to deliver letters highlighting the economic problems of ordinary Americans.

Security companies say the financial crisis is creating brisk business in everything from bomb-sniffing dogs to bodyguards.