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Posted at 06:00 AM ET, 05/07/2012

What do John Edwards and Newt Gingrich have in common? (A look at the week ahead in Congress.)

Former senator John Edwards (D-N.C.) arrives outside federal court in Greensboro, N.C., on April 12. (Gerry Broome/Associated Press)

Don’t be surprised if you hear the names of John Edwards and Newt Gingrich mentioned on the Senate floor this week.

Senate Democrats plan to consider a measure Tuesday that would extend lower interest rates for some federally subsidized college loans and pay for the extension by ending tax breaks for firms with three or fewer shareholders — commonly referred to as “S-corporations.”

Democrats call these types of tax breaks the “Newt Gingrich/John Edwards loophole,” because both former politicians took advantage of a federal tax law that allows those with high incomes to avoid paying Medicare payroll taxes on earnings by establishing S-corporations and treating only a portion of their total earnings as taxable wages.

Newt Gingrich. (JASON REED - REUTERS)
News reports cited by Democrats note that in 2010, Gingrich Holdings and Gingrich Productions paid the former House speaker about $444,000 in wages and declared $2.4 million as profits to his S-corporation, allowing Gingrich to avoid $69,000 in Medicare payroll taxes. Edwards did the same starting in 1995, when he paid himself $360,000 each year for four years and treated the rest of his $26.9 million in earnings as company profits, saving him an estimated $600,000 in payroll taxes.

Senate Democrats want to close the tax loophole by requiring S-corporation stockholders earning more than $250,000 annually to count any income from a limited partnership or professional services business as taxable income. The change would be limited to firms that derive at least 75 percent of their revenue from the services of three or fewer shareholders — but Democrats say it would generate enough revenue to pay for the lower student loan rates.

Before last week’s recess, House Republicans passed a bill that would keep college loan rates at 3.4 percent by cutting almost $6 billion from a preventative health fund — a nonstarter for Democrats.

Lawmakers from both parties generally agree in principle that college student loan rates should remain at 3.4 percent, but sorting out how to pay for the low rates could dominate debate on Capitol Hill until the rates are set to expire, on July 1 — if not longer.

Budget reconciliation in the House

House Republicans plan to approve a budget reconciliation package this week that would cut $261 billion in spending on domestic programs and some federal aid programs. As 2chambers first reported Friday, House Democrats will attack the plan as unfairly taking funding for programs benefiting the poor, senior citizens, and health-care and financial reforms enacted by the Obama administration.

Rep. Chris Van Hollen (D-Md.) and other Democrats on the House Budget Committee plan to spend this week attacking GOP spending plans. (Alex Brandon/Associated Press)
The GOP spending plan would replace automatic across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized an additional $1.2 trillion in cuts over the next decade, with about half of the money coming from defense spending.

But Republicans — and some Democrats — believe the cuts would decimate the nation’s military and are eagerly seeking alternative spending proposals. Both sides anticipate that a deal will be reached to cancel the automatic cuts before January, probably during a lame-duck session later this year.

The GOP, hoping to draw a line in the sand, last month ordered six committees to identify the $261 billion in savings. The plan should be approved Monday by the House Budget Committee before it is brought up for a full House vote later in the week.

D.C.-based bills

The House this week also plans to vote on an assortment of bills related to the District of Columbia. One measure would continue federal funding for the John F. Kennedy Center for the Performing Arts, another would authorize the use of the U.S. Capitol grounds for the Greater Washington Soap Box Derby, and another would endorse plans to develop the Southwest Washington waterfront.

Who said Congress doesn’t care about D.C.?

And finally . . .

Four congressional committees are investigating the Secret Service prostitution scandal, and this could be the most critical week yet for the agency and its director, Mark Sullivan. Late Friday, House Homeland Security Committee Chairman Peter T. King (R-N.Y.) sent a sharply worded letter to Sullivan asking why agency officials have yet to interview two of the 12 women who reportedly spent the night with Secret Service employees, including Dania Suarez, who gave a lengthy interview to a Colombian television station last week detailing her interactions with agency employees.

The Secret Service and Sullivan could face a much harsher fate on Capitol Hill if the support shown by King and other lawmakers begins to falter.

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