Baucus begins work extending tax relief on investments

“We just started to write it,” he told reporters, adding, “I’m not going to get specific, but I’m just saying that there will be some form of extension.”

Barring congressional action, the 15 percent tax on capital gains and dividends will morph next year into a 20 percent tax on capital gains, while dividends will be taxed at ordinary income rates, which are scheduled to rise to 39.6 percent in 2010.  

In addition, taxpayers earning more than $200,000 ($250,000 for joint filers) will soon pay a 3.8 percent tax on investment returns to help offset the cost of healthcare reform. 

Baucus said his committee is looking at how the tax on capital gains and dividends can remain the same to keep from adversely affecting investment strategies. 

“We’ll address that too,” he said. “We can’t let dividends go to ordinary rates.” 

Baucus is slated to host a hearing on the fate of the Bush tax cuts on Wednesday. Democratic leaders are keen to extend those breaks benefiting middle-class taxpayers and allow to expire tax cuts for wealthier taxpayers. 

Sources close to the committee told The Hill there will be some discussion at Wednesday’s hearing on extending all the Bush tax cuts to help the economic recovery. However, there does not appear to be much political will on the Democratic side of the aisle for extending tax breaks for the wealthy.

Baucus told reporters that the so-called “tax extenders” provisions that are resuscitated annually and the Bush middle-class tax breaks would be extended before years’ end. 

“I think we’ll act by the end of the year on those extenders and the middle-class tax cuts,” he said.