Value-Added Tax Is Reconsidered : Health plan: White House takes another look at levy on goods to help pay for universal care. It would potentially hit hardest at the poor and the middle class.

Anxious to find new money to pay for sweeping health care reforms, the White House is taking another look at a national value-added tax, a potentially controversial levy that President Clinton appeared to have ruled out in February, Administration officials said Wednesday.

The Administration is drawn to the idea by its simplicity and its potential for helping pay the enormous sums needed to guarantee health coverage for all Americans. Sources said that White House analysts also were intrigued by a nationwide poll last month which found that 58% of the public would support a 3% value-added tax if it were earmarked for health care reform.

The political costs to Clinton, however, could be great. By its nature, a value-added tax is regressive, potentially landing hardest on low- and middle-income families whose tax burden Clinton promised last year would be eased if he were elected.

The President has since retreated from that promise, citing unexpectedly higher federal budget deficits. He already has proposed financing part of his economic package with a national energy tax, which would raise the tax burden of middle-income Americans.

White House Communications Director George Stephanopoulos said Wednesday that a value-added tax is still among the array of prospective financing sources under consideration by the Task Force on National Health Care Reform as it begins to fine-tune various options to be presented to Clinton.

“The working groups are looking at it . . . but the President has not made a decision,” Stephanopoulos said. “I assume that he will consider the argument if it is presented to him.”

Alice Rivlin, deputy director of the Office of Management and Budget, told a breakfast meeting of the National Assn. of Manufacturers that such a tax “is clearly a possible candidate.”

The issue is just one of hundreds that the President and First Lady Hillary Rodham Clinton, who chairs the task force, must decide in the weeks ahead. They plan to unveil a proposal to overhaul the health care system sometime in May.

A value-added tax is imposed on products at each stage of production and is ultimately passed on to consumers in the form of higher prices. It is sometimes called a national or general sales tax, although its application is different from state and local sales taxes, which are calculated at the time of purchase and collected on top of listed prices.

Most nations that compete with the United States economically have value-added taxes. But the Clinton Administration could expect strong opposition to the idea because of the regressive nature of the tax.

For instance, just last week the U.S. League of Women Voters endorsed a bevy of tax increases to pay for health care reform, including raising income taxes. But the league ruled out a value-added tax because, the organization said, it would unfairly burden poor and middle-income families who must spend a higher part of their income on consumable items subject to the tax.

To ease the burden on those families, such items as housing, food, education, utilities or medical costs might be excluded from the tax.

“The more you exclude, the less regressive it becomes,” said analyst Edie Rasell of the Washington-based Economic Policy Institute. Such exclusions would raise less money, of course, but they might make the tax easier to sell politically.

The President and Mrs. Clinton this week are undergoing many hours of briefings on literally hundreds of health care reform options that have been assembled by the 500-member task force since Jan. 25.

Foremost among the decisions that must be made are how soon coverage should be extended to the 37 million uninsured Americans--and where to find the $30 billion to $90 billion that universal coverage would cost annually, according to Administration analysts.

While a value-added tax might be controversial politically, the White House sees merits in its simplicity, sources said. A 3% tax could raise as much as $60 billion a year, according to the Congressional Budget Office.

The nationwide poll that found a majority of the public would support a 3% tax for health care reform was conducted by the California-based Henry J. Kaiser Family Foundation and Louis Harris & Associates, a leading polling firm. Foundation officials later briefed task force members on the findings.

Clinton first raised the idea of a value-added tax in February, in response to a question at a town hall meeting in Chillicothe, Ohio. He did not mention it directly in connection with financing health care reform but as possibly part of a broader change in the way the government raises money.

“I do believe that America, at another time, and maybe not too long in the future, will debate whether we want to shift the nature of our tax system,” Clinton said.

Asked about the remark after the meeting, Clinton said: “I did not mean to float a trial balloon. . . . It is not now under consideration. If we start considering it, I’ll tell you.”

But the idea was thrust back in the limelight Wednesday by Administration officials.

In her remarks to the manufacturers, Rivlin acknowledged that extending health care to the uninsured clearly would “take some more resources, and a VAT, or a general sales tax, has a good deal to recommend it. . . . “ Rivlin also conceded that such a tax can hit hardest at the poor and thus “has to be offset or designed in some way so that it is not too painful to the lowest-income groups.”

Aside from the value-added tax, the White House is considering 20 or more proposals for tax increases, including so-called sin taxes on tobacco and alcohol products, as well as a cap on the premiums that insurers may charge.

Word of the possible new tax surfaced as Senate Republicans continued to spar with the White House over Clinton’s proposed $16.3-billion economic stimulus plan, which faces a major test next week when the Senate again votes on whether to end a GOP filibuster that has stalled the legislation.

Clinton said at a summer jobs conference in nearby Arlington, Va., that the bill would give “a little goose” to the nation’s economic recovery but Republicans retorted that it would merely drive up the budget deficit.

“I don’t have all the answers but I know this: Doing nothing is not the answer,” Clinton declared.

Elsewhere, House Republicans borrowed a favorite Clinton tactic by announcing that they would take their attack on Clinton’s plan directly to the public in a series of meetings that they are planning across the country Saturday.