President Barack Obama is increasingly turning to financiers and the firms that employ them as a source of revenue to plug holes in his budget and what he sees as gaps in the tax code itself.

Obama yesterday announced $58 billion in new proposals that his aides said would close “unfair loopholes” in the tax system. The changes would mean higher taxes for options and commodities brokers, hedge fund managers, and life insurers such as TIAA-CREF. The tax increases would help pay for Obama’s health care reforms.

Those proposals and others would nearly triple income taxes paid by executives at private equity firms and cap the value of itemized deductions. As part of the changes, high-income earners would be unable to avoid top marginal rates when they are reinstated in 2011 to 36 percent and 39.6 percent for Americans making more than $200,000 annually, analysts said.

The administration is “trying to do 39.6 percent and they’re trying to make that work better,” said New York University tax law professor Daniel Shaviro. “It makes sense to make that rate be less porous.”

The policy initiative was launched as the Obama administration issued revised budget figures projecting the federal deficit would hit a record $1.84 trillion this year and $1.26 trillion in fiscal 2010.

Obama, in his announcement yesterday, proposed to end the ability of options and commodities brokers to pay a blend of capital gains and ordinary tax rates on their income. He’d also abolish the use of equity swaps by offshore hedge fund managers to sidestep U.S. withholding taxes and increase penalties for Americans trying to evade tax by hiding money in offshore banks.

‘Carried Interest’

Those proposals follow an earlier plan to make executives at private equity firms and other investment partnerships pay the full tax rate on so-called “carried interest,” the share of a fund’s profits they earn as compensation that is typically 20 percent of any gains over a certain level.

“We continue to believe that carried interest should be treated as a long-term capital gain,” said Robert Stewart, communications director for the Private Equity Council, a trade group representing firms such as the Carlyle Group, Blackstone Group LP and KKR & Co. LP.

Obama also unveiled a trio of proposals that would affect life insurance products, including new rules applying to policyholders when they sell their coverage to investors and a proposed reduction of deductions insurers such as Hartford Life, MetLife and TIAA-CREF use to lower their tax burden.

Industry Reaction

The proposals drew criticism from two industry groups: The Washington-based American Council of Life Insurers, which warned against making insurance more expensive, and the Reston, Virginia-based Association for Insured Retirement Solutions.

“Seventy-five million American families rely on the products offered by life insurers for their financial and retirement security,” said Frank Keating, the former Republican governor of Oklahoma who is president of the life insurers council. “This is absolutely the wrong time to make it more expensive for families to obtain the security and peace of mind our products provide.”

Cathy Weatherford, president and chief executive of the insured retirement solutions group, said “burdening not only the life insurance companies but the brokers that sell the insured solutions will ultimately hurt Americans who are already suffering.”

Estate Tax

Additionally, Obama proposed to close so-called loopholes that would raise an extra $24 billion from the federal estate tax, which he wants to prevent from expiring as scheduled next year.

The proposal would change valuation rules, subjecting more of an estate to possible tax. Obama has proposed extending current law that allows the first $7 million of a couple’s estate to be bequeathed to heirs untaxed while imposing a 45 percent levy on additional amounts.

The new proposals augment Obama’s policy that would increase taxes on the richest Americans and corporations by more than $1 trillion over a decade while reducing them for many small businesses and the 95 percent of the population who earn less than $200,000 annually.

“We are taking the next step in creating fairness in our economy by ending loopholes that allow companies to avoid paying taxes while millions of hardworking families and small businesses pay their fair share,” Treasury Secretary Timothy Geithner said in a statement yesterday.

‘Easy to Demagogue’

The proposals drew a rebuke from Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington lobbying group. He said the administration was overreaching with its proposals and that “it’s easy to demagogue” the financial services industry.

Will Acworth, a spokesman for the Washington-based Futures Industry Association, said his group was studying Obama’s proposal to eliminate a 28-year-old tax benefit for commodities brokers.

The law lets the brokers pay a blend of capital gains and ordinary tax rates on their income. It works this way: 60 cents of each dollar earned by an options dealer is taxed at the 15 percent capital gains rate while the remaining 40 cents is taxable at ordinary rates as high as 35 percent. Combined, the effective tax rate is 23 percent.

The Obama administration said there was “no reason” to keep the benefit.

Offshore Havens

The tax recommendations supplement a previous plan that focused on corporations, including $190 billion in proposals to force U.S.-based multinational companies such as Coca-Cola Co., General Electric Co., and Procter & Gamble Co. to pay an extra $190 billion over the next decade by eliminating ways for them to shift profits into offshore tax havens.

That proposal was cheered by labor groups such as the SEIU, which said the international tax rules create incentives for U.S. companies to expand overseas rather than create new jobs domestically.

“American businesses reap the benefits of millions spent on Washington lobbying with tax codes that allow them to shirk their responsibility to pay taxes and actually pay them to create jobs overseas instead of here in America,” said SEIU Secretary-Treasurer Anna Burger.

Eric Toder, a former Treasury Department official during President Bill Clinton’s administration, was among those disputing such assessments. He said research shows that arguments tying domestic job losses to U.S. international tax policy are “sort of a red herring.”