Senate Finance Committee Chairman Max Baucus Tuesday said he expects the Senate to extend middle-income tax cuts before they expire by the end of the year.

But Baucus said lawmakers were still weighing the details, including tax rates for dividends and families earning more than $250,000 a year. But he added that “clearly we will want to extend the middle income tax cuts at the very least.”

Without congressional action, the tax cuts enacted under President George W. Bush will expire at the end of the year and current tax rates will rise for most income groups, to about 28 percent, 31 percent, 36 percent and 39.6 percent from 25 percent, 28 percent, 33 percent, and 35 percent, respectively.

Investors are watching because under current law, tax rates on the wealthy for dividends would be treated as ordinary income in 2011, meaning they would be taxed as high as 40 percent.

Democrats are reluctant to let all of the Bush tax cuts expire amid a tepid economic recovery.

President Barack Obama has proposed extending the tax rates for individuals earning less than $200,000 and for families earning less than $250,000 but letting the rates rise back to 36 and 39.6 percent for the wealthier income groups.

Obama also proposed raising tax rates on capital gains for the upper-income brackets to 20 percent from the current 15 percent.

Senate Democratic leaders met this morning with Obama to discuss the legislative agenda for the rest of the year. Democrats are facing a tough election cycle with unemployment stuck near 10 percent, and Republicans are poised to pick up a number of Democratic seats.

Tax-writers in the House are considering a one-year extension of the lower rates for the middle class, which would cost $270 billion over 10 years. The chamber’s Democratic leader, Steny Hoyer, said Tuesday he expected Congress to address the tax cuts by year end.