FACTBOX-Budget, tax ideas put to Obama team

WASHINGTON Feb 23 (Reuters) - President Barack Obama's top advisers heard recommendations on how to increase tax revenues and improve the U.S. budget process at a White House summit of experts and policymakers on fiscal responsibility on Monday. [ID:nN23446491]

Here are some of the ideas put forward:

TAXES AND REVENUES

U.S. Treasury Secretary Timothy Geithner and chief White House economist Christina Romer chaired a session on tax issues and heard several experts call for a national sales tax akin to Europe's Value Added Tax.

Yale University law professor Michael Graetz and Brookings Institution economics experts William Gale were among those who said a VAT tax is needed given that the traditional tax system is not providing sufficient revenues.

Other ideas included a carbon tax based on energy usage.

Maine Republican Senator Olympia Snowe called for a complete overhaul of the tax code, saying currently the tax system had become extremely complex and burdensome.

Some participants called for a reduction in the corporate tax rate and to defer any increases to income tax rates at least until the U.S. economy recovers.

Given that Obama wants to cut the deficit in half in four years, Republican Senator Jon Kyl of Arizona said that he hoped Obama would not pursue deficit reduction so strongly that it put an economic recovery at risk. He cautioned in particular against raising taxes.

Geithner told Kyl that he was "absolutely right" that the U.S. government should do nothing that might have a negative impact on the economy while not commenting specifically on Kyl's call not to raise taxes.

TACKLING ENTITLEMENTS

In a panel on "budget process," lawmakers and economists debated whether it would be a good idea for Obama to name a commission to grapple with the looming problem of entitlements, like government retirement or health programs.

The group was divided between those who thought a commission would be a good way to solve the problem of costly entitlements and those who opposed the idea.

Senate Budget Committee Chairman Kent Conrad of North Dakota and Republican Sen. Judd Gregg of New Hampshire were among those who favored a commission or a task force.

They both warned that unless the financial markets get a clear signal that the United States is serious about tackling long-term budget deficits, the value of the dollar would fall.

But House Appropriations Budget Committee Chairman David Obey, a Democrat, was wary of a commission.

He said shifting responsibility for the tough decisions onto a panel would "freeze in place" the political debate.

On one point, the participants seemed to agree: it was important to set a deadline for working out the problem.

Obey said one solution might be to "lock people in a room with three bottles gin and don't let them come out until they get an agreement."

HEALTH CARE OVERHAUL

Office of Management and Budget Director Peter Orszag and White House domestic policy adviser Melody Barnes directed a health care session.

Participants included lawmakers and representatives from labor, business and the health industry. Lawmakers generally agreed that tackling the health care system to control soaring costs and provide coverage for more Americans was crucial to the U.S. economy and reducing budget deficits.

Democratic Senator Baucus, who as chairman of the Senate Finance Committee will play a major role in writing legislation, said the stars were aligned for revamping the U.S. health care system.

He said he left a tax session to attend the health panel because "I just knew this would be a lot more interesting than tax reform." He said any overhaul will require bipartisanship and added, "I also urge people at this early stage to not blow it" and get bogged down in ideology.

Republican Senator Lamar Alexander said he believed it was wise to tackle health care first. But he added that lawmakers at the same time should go ahead with a Social Security overhaul "while we can." He suggested that when lawmakers overhaul the health system they do away with Medicaid, the healthcare program for the poor, which is "strangling" states and forcing governors to cut education and other spending priorities.

Democratic Representative George Miller made the case for establishing a single payer system as the only way to achieve universal health coverage: "This has got to be about improving the health status of Americans."

Nancy Nielsen, President of the American Medical Association, expressed concern about congressional budget policies that require that any new spending or tax break be offset elsewhere in the budget by spending cuts or tax increases. She said any savings realized in a health care overhaul should be plowed back into the health system. She also said the sobering truth about health care was that "We simply cannot pay for everything for everybody." (Reporting by Steve Holland, Donna Smith and Caren Bohan; Editing by David Storey)