Senate Finance head urges extending tax breaks

WASHINGTON (Reuters) - The head of the Senate Finance Committee on Thursday proposed extending tax breaks for millions of middle-class Americans, a major part of President Barack Obama's economic plan.

Democratic Senator Max Baucus' bill would, among other things, allow middle-income taxpayers to permanently benefit from a 15-percent tax rate on capital gains from the sale of stocks and other assets.

Those in the highest income-tax brackets would pay a capital gains tax rate of 20 percent starting in 2011.

The low capital gains tax rate and other tax cuts enacted under former President George W. Bush will expire at the end of next year.

Baucus is proposing extending some of them for middle-class taxpayers, while allowing them to expire for higher-income earners.

The bill "would make permanent the middle-income tax rates, child tax credit, and marriage penalty relief in the 2001 tax law," Baucus said in a statement. "I am hopeful that we can move legislation along these lines this year."

Baucus also called for making permanent some of the reduced income tax rates set by the 2001 law. The 10-, 25- and 28-percent tax rates would be made permanent. The 15-percent tax rate already is permanent.

Those in higher tax brackets would see their rates revert at the end of next year to what they were before 2001, when the top income tax rate was 39.6 percent.

Without congressional action, the 2001 individual income tax rates of 10 percent, 25 percent, 28 percent, 33 percent, and 35 percent will move up to 15 percent, 28 percent, 31 percent, 36 percent, and 39.6 percent in 2011.

Obama is hoping the additional revenue could help lower huge budget deficits the United States suffers.

(Reporting by Donna Smith, Editing by Xavier Briand)