WASHINGTON — House Ways and Means Committee Chairman Sander Levin, D-Mich., said a tax on financial institutions proposed by the Obama administration needs more study before it becomes part of legislation.
Levin signaled he doesn't favor pairing the bank tax with legislation already pending in Congress, such as the financial overhaul bill or a separate bill to extend expired tax breaks.
First, he said, the tax should be used for deficit reduction and not to pay for new spending. "At this point, I don't think the bank tax is ready to be a pay-for," Levin said.
He spoke to reporters after Ways and Means Committee Democrats met with Treasury Secretary Tim Geithner in a closed-door meeting Wednesday.
More generally, Levin said, lawmakers need more time to study how to structure the tax and whom it would affect before they are ready to flesh it out into legislation.
"What we're doing now is moving towards further discussions of it," he said.
Geithner stressed in strong terms during the meeting with House lawmakers that the administration prefers that the money raised from the tax, around $90 billion over a 10-year period, be used to pay down the deficit and not earmarked for other purposes, according to Levin.
Senate Finance Committee Chairman Max Baucus, D-Mont., has said he is open to using the revenue from the tax to offset other tax or spending legislation.
Geithner used the House meeting to explain, and answer lawmakers' questions about, the Treasury Dept.'s latest iteration of the tax. The proposal would tax the risk-weighted assets of financial institutions with holdings greater than $50 billion, with riskier investments coming in for a higher rate of tax.
Following the latest changes to the proposal, made public on Tuesday, some House Democratic lawmakers seem to be warming to the administration's plan. "It's not unreasonable," said Rep. Earl Blumenauer, D-Ore.
Earlier this year, discussion by House lawmakers had centered around a tax on excess profits of banks, but Geithner discouraged that approach during appearances on Capitol Hill Tuesday and Wednesday.
"He made clear that a profits tax is much more difficult to implement, and I don't challenge that," Levin said of Geithner.
The administration changed its approach from a version it had put forward earlier this year that would have taxed liabilities at a fixed rate of 0.15%.
"We felt a risk-weighted approach would do better in capturing complex financial products that were off-balance sheet," Gene Sperling, counselor to Geithner, said in an interview.
"It is also more consistent with the goals of deterring firms taking excessively risky positions that have proven to be destabilizing," Sperling said.
Levin said his top priority for the current work session prior to Memorial Day recess is passing legislation to extend expired tax cuts for businesses and individuals, while renewing jobless benefits through the end of the year.