This is a rush transcript from "Your World With Neil Cavuto," December 9, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, to Washington, the House just voting to extend $31 billion in tax breaks one big tax hike to pay for it, a $26 billion hike on investment fund managers. But is this any way to entice folks to invest in America?

My next guest doesn`t think so, but he voted to extend those tax breaks today. He`s Democratic Congressman Mike McMahon from New York.

Congressman, I am confused. You voted for this, but you are against this? What`s the deal here?

REP. MICHAEL MCMAHON (D), NEW YORK: You know what, Neil?

Today, we did vote, as you said, to extend $31 billion in — in tax breaks, in particular to allow for the real estate tax deduction. And that is very important for the people back home in Staten Island and Brooklyn.

CAVUTO: Right.

MCMAHON: We do have pay-go rules in the House. So, anything we pass has to have a pay-go component to it. What the leadership chose to put in was the carried interest provision, as you mentioned.

But it`s — as you know, I also oppose that. And it`s my belief that when the bill comes back from the Senate...

CAVUTO: But you ended up voting for the bill that would include it, right?

MCMAHON: Because we knew that the Senate will not have that pay-for provision in it, and...


CAVUTO: I got you. So, bottom line, you had an up-or-down vote, and you had to vote up or down on this, and...

MCMAHON: Right, because — because we need to get those tax breaks back for the homeowners and the business owners back in the district. And I`m certain that those...


CAVUTO: Well, maybe you do, Congressman, but I have got to tell you that — that there a lot of investment guys who talk to me say, if you want to kill whatever market rally we have been having, recent days notwithstanding, you just found a sure way to kill it.


MCMAHON: No, that is absolutely not the case. As you know, from my vocal opposition to that provision and the assurances that we have received from the Senate that it won`t be in the final provision, that allowed us to move...

CAVUTO: Well, how do you know? Then why did you vote for even something that stood the risk of being in there?

MCMAHON: Because it is very important for the people back in our district to be able, as they go into next year, to do their tax returns that they can continue to deduct their real estate taxes.


CAVUTO: That`s — no, no, That, I understand, sir. And it is a very good point.

But here`s what I`m asking, beyond the real estate component. There are a lot of investors are going to hear this news: Hey, did you hear they are going to start taxing fund managers here, and that`s going to trickle down to us? Why the heck should I invest now? I am going to get out of Dodge before the tax man comes.

You might, again, with innocent intentions, Congressman, be — be leading the next market bust.

MCMAHON: You know, I don`t think that is the case at all, Neil, because the fund managers that we spoke to, the investment bankers that we spoke to, the venture capitalists, they were not concerned about this provision at all, because they realize that it was really a marker that would never come home.


CAVUTO: Congressman, I talk to these guys all the time. They`re on Fox Business Network, which, by the way, if you don`t get, demand.

But they tell me to a man and woman, this is crazy. Don`t even think about it.

MCMAHON: Well, I think what is more important is that we are in Washington trying to come up with a reform package that does allow Wall Street and the financial services industry to continue the rebound that they are on.


MCMAHON: That is something that I am a strong voice for.

And that is what we`re — what we are working on.

CAVUTO: Gotcha.

MCMAHON: I really do think that this one issue is a bit of a red herring.

CAVUTO: All right.

MCMAHON: And I am quite certain and I would not have voted for it if I felt it would be in the final package. But it was a process vote, not always happy with those, but you have to do them in Washington.

CAVUTO: All right, understood. Crazy process, it is. It is what it is. All right, Congressman.

MCMAHON: I agree with — it is a crazy process.

CAVUTO: All right, Congressman, there we go. I understand.

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