UPDATE 2-Swedish centre-left, leading in polls, proposes taxing banks more
* Social Democrats want 4 billion crown tax rise for banks
* Opposition party leads polls before September election
* Bank association warns higher costs will mean less credit (Adds quotes from the Moderates and the Swedish Banking Association)
VISBY, Sweden, July 1 (Reuters) - Sweden's opposition Social Democrats, front-runners to lead the next government after an election in September, said on Tuesday they wanted to raise taxes on banks in order to pay for child care reforms.
Magdalena Andersson, the Social Democrats' economic spokeswoman and likely next finance minister, said the party was keen to raise bank taxes by 4 billion Swedish crowns ($598 million) annually.
"It is as much as the banks earned on the corporate tax cut in 2013," she told a news conference, saying the move would restore banks to the same rate of tax as in 2012.
On Sunday, Social Democrat party leader Stefan Lofven proposed improving child care by limiting the number of children per group, a reform he said would cost 1.1 billion Swedish crowns annually.
Anna Kinberg-Batra, who chairs the Parliamentary Financial Policy Committee of the biggest government party, the Moderates, said the proposal would threaten Swedish economic growth and welfare.
"The Social Democrats are proposing a single tax hike without any job-creating reforms. This is putting Swedish growth at risk," she said, adding that lower growth would mean less money for schools and welfare.
Swedish banks have come under fire in local media for their high lending margins. Politicians across the spectrum have been increasingly critical of banks and told them to put more money aside to cover for potential risks.
The leading banks - Nordea, Handelsbanken , SEB and Swedbank - made it through the financial crisis relatively unscathed and are today some of Europe's most profitable lenders, thanks in part to strong public finances and a healthy corporate sector.
The four made a combined net profit of more than 19 billion Swedish crowns ($2.84 billion)in the first quarter this year.
Thomas Ostros, CEO of the Swedish Banking Association, said higher costs for the banks would lead to less credit, something which could hurt both households and companies.
"This is a tax on credit, not on (bank) profits, which will dampen growth. That's sad, because we need credit to get the wheels (of the economy) in motion," he said.
Sweden's centre-right government is trailing the Social Democratic-led opposition badly in opinion polls. An opinion poll on Saturday showed support for the government parties falling to the lowest level since 1979. ($1 = 6.6953 Swedish Kronas) (Reporting by Johan Sennero; Editing by Mark Trevelyan)