UPDATE 2-Key U.S. lawmaker opposes financial trade tax

* Financial transaction tax too punitive: Neal

* Several financial companies reside in Mass (Adds companies in state, further comments, byline)

By Kim Dixon

WASHINGTON, Feb 25 (Reuters) - The chair of an influential congressional tax panel said on Thursday he opposes any tax that punishes a company that was not propped up or rescued by the U.S. government.

Representative Richard Neal, who heads a tax-writing subcommittee, said he did not think "companies that didn't take" money from the government's $700 billion bailout fund should be penalized.

"Most of the financial companies that I've worked with over many years - they were not guilty of errant behavior," Neal, a Democrat from Massachusetts whose district abuts Boston, said at a conference in Washington.

When asked about the Obama administration's proposed tax on the largest financial services firms, Neal said he favored a go-slow approach.

"That would be a good idea for vetting in a series of committee meetings," he said.

Neal's comments signaled proposals to tax financial transactions will not move forward in Congress. One congressional plan would impose a 0.25 percent tax on over-the-counter derivatives transactions and stock trades.

Neal said he made his argument to Representative Charles Rangel, who chairs the powerful House Ways and Means tax-writing committee.

"I think for the moment (Rangel) is in agreement with me," Neal said at the conference.

He also said he was making his case to the Treasury Department.

Financial companies headquartered in Massachusetts include privately held mutual fund company Fidelity Investments, Eaton Vance Corp (EV.N) and State Street Bank [STT.N].

(Reporting by Kim Dixon; Editing by James Dalgleish and Dan Grebler)