U.S. President Barack Obama will make his case for a second term in a speech on Thursday at the Democratic Party convention, where he is likely to touch on taxes, a polarizing issue that has caused major disputes with Republicans in his first term.

Obama faces Republican challenger Mitt Romney, a former governor of Massachusetts and co-founder of private equity firm Bain Capital, in the November 6 presidential race.

Here are some major tax issues facing Obama and Romney.

BUSH-ERA TAX RATES

The most immediate issue is the looming expiration at year-end of lower income and investment tax rates enacted under President George W. Bush in 2001 and 2003.

Obama agreed in 2010 to extend these rates for two years, so they will expire on December 31 if Congress does not act.

The president wants to keep tax rates the same for families making less than $250,000 annually.

For income above that level, he wants to raise the top two tax brackets to 36 percent and 39.6 percent. The highest brackets have been 33 percent and 35 percent for 11 years now.

Republicans want to extend all the Bush-era rates and Romney has proposed making additional tax cuts.

On investment income, Obama wants to raise the tax rate on dividends to match the ordinary income tax rate for the two highest tax brackets. He also has proposed raising capital gains taxes from to 20 percent from 15 percent for those brackets.

Private equity and other financiers would see a portion of their pay, known as "carried interest," taxed as ordinary income, a change from the 15 percent rate they pay now, under the president's plans.

Obama has also endorsed a "Buffett rule," named for billionaire investor Warren Buffett, that would require households making more than $1 million a year to pay at least 30 percent of their income in taxes.

CORPORATE TAXES

Obama has proposed cutting the top corporate income tax rate to 28 percent from 35 percent. Romney and many Republicans have proposed a more dramatic rate cut to 25 percent.

In February, Obama offered a long list of corporate tax breaks he wants to end, ranging from accelerated depreciation and inventory accounting to interest on overseas profits and various tax provisions benefiting oil and gas companies.

The president has said he wants to keep the current "worldwide" system of taxation where companies pay taxeson all profits, including those earned overseas. Republicans want to exclude profits earned outside the United States from taxation.

TAX REFORM

Political leaders from both parties, including Obama and Romney, say they back a complete tax code overhaul. This has not been done since 1986, under Republican President Ronald Reagan with a Republican Senate and Democratic House of Representatives. 

Such as task would likely involve lowering most income tax rates, while scrubbing the code of reams of popular deductions.

Some observers are urging the president to make tax reform a top priority and use his bully pulpit to achieve it.