The White House on Monday unveiled a $210 billion plan to tax more of U.S. firms' overseas earnings and crack down on tax avoidance - including a new measure to shut down a tax maneuver by foreign hedge funds.

In the hedge fund transactions, U.S. banks including Lehman Brothers Holdings Inc. (LEH), Morgan Stanley (MS) and Citigroup Inc. (C) used complex swaps to help foreign investors reap the benefits of investing in the U.S. stock market, without having to pay a 30% withholding tax.

That proposal is just one aspect of a number of tax changes the Obama administration would make affecting U.S.-related income that moves across national borders. President Barack Obama is looking to reduce the deficit and pay for pricy new domestic programs, and he has long made clear he believes the U.S. international tax rules are ridden with loopholes and need fixing.

Most of the money that would be raised from tax changes in the international area - $189.5 billion out of a total $210 billion - would come from proposals Obama announced last week to tax more of firms' foreign profits. U.S. companies say the proposals would hamper their ability to compete in the global marketplace.

Jeffrey H. Paravano, chair of the tax group at the Baker & Hostetler law firm, said that when taken together, the Obama tax proposals would be expected to raise the effective tax rate of a U.S. multinational by about 6%. That would mean an effective tax rate of 32% for one company his firm advises, he said.

Paravano said he is troubled by the fact that Obama is not proposing to reduce the statutory corporate tax rate as part of his bid to root loopholes out of the code. "It's great to close tax loopholes if you're going to reduce the rate generally," he said. "If not, U.S. companies' effective tax rates will go so high that we can no longer compete."

A Treasury Dept. official briefing reporters on the proposals Monday said the Obama administration is trying to "strike a balance" on overseas income between keeping U.S. firms competitive and removing tax code distortions that might cause a firm to "invest in Malaysia instead of Michigan."

The Obama tax proposals do not include a plan to limit foreign insurers' ability to reinsure their own policies - a practice some Capitol Hill Democrats allege is done to avoid U.S. taxes. That is a victory for foreign insurers including Swiss Re and ACE Limited (ACE), and a defeat for U.S. proponents like W.R. Berkley Corp. (WRB) and Chubb Corp. (CB).

The Treasury official said that omission should not be interpreted to mean that Obama has taken a position on the reinsurance issue. "We are still reviewing that and have not yet come to a decision on it," said the official.

The proposal affecting hedge fund dividend swaps was championed by Sen. Carl Levin, D-Mich.

Another new proposal would restrict income shifting by a U.S. company to a foreign subsidiary, by transferring intangible property like patents or goodwill.

Another would repeal the ability of U.S. companies that derive at least 80% of their income from foreign business to treat interest and dividends as exempt from U.S. withholding tax.

A plan to disallow foreign tax credits for some U.S. firms that pay a special levy to a foreign jurisdiction in exchange for an economic benefit, would raise $4.5 billion over 10 years.

Besides the international tax measures, the Obama budget proposes $735.5 billion in tax cuts for individuals over the next 10 years, which have been announced previously.

The primary item, the "making work pay tax credit," would deliver a $535 billion tax cut through 2019 for qualifying individuals; the expanded child tax credit for lower income families would deliver $70.9 billion in tax relief while the expanded saver's tax credit and automatic enrollment in IRAs would provide $59.6 billion in relief.

-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones.com