Tax writer Levin: Bank tax weighed but no VAT

WASHINGTON (Reuters) - U.S. lawmakers are seriously mulling a tax on banks to recoup government bailout funds but a value-added tax is a nonstarter, the acting chairman of the tax-writing panel in the U.S. House of Representatives said on Monday.

The idea of a value-added tax, or VAT, has gained attention recently after Paul Volcker, an adviser to President Barack Obama, repeated his backing for it. Some Republicans have blasted Democrats for suggesting new taxes, citing the VAT, but the top House tax-writer said it would not get support.

"I've heard almost nobody within our ranks discuss it," Representative Sander Levin, chairman of the House Ways and Means Committee told a press lunch in Washington, saying if it did come up it would be a "goner."

Shortly after Levin's remarks, Obama spokesman Robert Gibbs told a press briefing that a VAT is not under consideration.

Most industrialized countries have some form of VAT, which is assessed at every stage of production of a good, with the ultimate cost borne by the consumer.

Soon after Volcker's most recent comments, Republican House leader John Boehner wrote reporters criticizing the VAT as a Democrat idea to pile on more taxes, citing a memo from an economist arguing it would lock in a "welfare state".

Levin said Republicans were exaggerating the idea's potential support in an attempt to peg Democrats as free-wheeling taxers.

The 14-term Michigan Democrat took over the panel last month after Representative Charles Rangel stepped down, facing a congressional ethics probe.

BANK TAX HEARING ON TUESDAY

One tax idea gaining some traction among House lawmakers is Obama's plan to tax financial institutions to recoup government funds used during the recent economic meltdown. Levin said he has been talking to the administration about the structure of such a tax.

"One way or another we are going to consider this issue as a financial fee," Levin said.

Obama in January proposed a 0.15 percent tax on liabilities of big financial institutions to deter risk taking that contributed to the economic free fall beginning in 2008 and culminated in the government spending billions of dollars to prop up Citigroup, American International Group and others.

The idea will get its first Senate hearing on Tuesday, when the Finance Committee hears from Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, the government's bailout program during the economic meltdown.

The idea is seen having far less support in the Senate, where the tax-writing Senate Finance Committee is led by a more conservative Democrat, Max Baucus.

Talks in the House Ways and Means committee are further along. Staff there are looking at revisions to Obama's $50 billion asset cap and basing the tax on profit rather than liabilities.

Levin poured cold water on the idea of taxing securities transactions, which some lawmakers have proposed, saying it would not be acceptable.

(Reporting by Kim Dixon; Editing by Tim Dobbyn; Editing by Bernard Orr)