WASHINGTON (Reuters) - With Democrats and Republicans urging caution, US Senate Majority Leader Harry Reid vowed yesterday to push to recoup millions of dollars in executive bonuses at taxpayer-funded insurer American International Group (AIG).

President Barack Obama has been among those who has voiced concern about proposals to slap recipients with punitive taxes. But Mr. Reid said the bonuses, which have sparked nationwide fury, had to be reclaimed.

"We will continue to work to right this egregious misuse of taxpayer dollars," said Mr. Reid who may be offered a number of options on how to get the money back.

"With Republican co-operation, we can quickly and responsibly return these funds to the American people."

The Nevada Democrat's comments came after days of public outrage over $165 million in employee bonuses paid out by the Connecticut-based company, which has received nearly $180 billion in federal aid. Both political parties appear divided over plans to turn to the tax code to recoup the cash.

The House passed its own bill last week aiming to impose a 90 percent tax on bonuses for certain executives at companies which receive taxpayer bailouts.

But some analysts have said such moves moves could be difficult to enforce. They may be open to legal challenges and could be counterproductive if they lead to an exodus of experienced professionals from financial firms.

Republican Senator Jon Kyl proposed the Senate wait until at least next week before it takes any votes on the bonus issue. "I urge my colleagues to take a deep breath here, talk to the administration, hold a hearing and see if there isn't a better way" than a punitive tax, he said.

Mr. Kyl suggested that Treasury Secretary Timothy Geithner might have the authority, under terms of the recent $787 billion economic stimulus package, to claw the money back.

Echoing early calls by Democrats and Republicans, Mr. Kyl also said AIG employees could be asked to return the money or AIG could renegotiate the contracts that provided them.

"There are other ways to accomplish the same result," Mr. Kyl said.

If it moves forward, the Senate could consider the House bill which would apply to executives with incomes over $250,000 who worked for AIG or other firms that got at least $5 billion in government aid. That could ensnare others who receive federal help, such as mortgage financing company Fannie Mae.

An alternative Senate bill would recoup the bonuses with a potential 70 percent excise tax.

"We will continue to talk before deciding on our next move," said Mr. Reid's spokesman Jim Manley.