Democratic letter urges tax freeze on investments

Adler's letter argues these changes could have unintended consequences on the investment community. 

"Raising the tax rate on dividends would likely cause some companies to forego paying dividends and others to pay a lower amount to shareholder," he states. 

The letter also points out that seniors who rely on dividends to supplement their retirement nest eggs could be negatively affected by the tax increase on dividends.

"Raising taxes on capital gains and dividends could discourage individuals and businesses from saving and investing," the letter states. "We urge you to maintain the current tax rate for both dividend and long-term capital gains taxes."

Approximately 40 members have signed the congressman's letter, which comes as Senate Democrats prepare to discuss the fate of the Bush tax cuts. 

Senate Finance Chairman Max Baucus (D-Mont.) is slated to present a proposal to the Caucus on Thursday. 

The legislation is expected to extend at least a portion of the Bush tax cuts that benefit the middle-class. 

The proposal might also allow dividends to be taxed at 20 percent instead of ordinary income rates. 

Pay-as-you-go rules stipulate this change must be offset, which could cost approximately $100 billion over ten years. But Baucus might seek to waive the rule to stop Republicans from opposing the bill.