Millionaires who avoid payroll taxes by claiming income as business profits are among those in Democrats’ sights as congressional budget negotiators seek a deal by next month.

Limiting the ability of some business owners to use the S-corporation structure would save $12 billion over the next 10 years, according to a list of tax breaks obtained by Bloomberg News that Democrats are considering for elimination.

That provision allowed Newt Gingrich and John Edwards to avoid payroll levies, according to tax returns the two filed during their 2012 and 2004 campaigns for the White House.

“It shouldn’t be difficult for Republicans to agree to put just a few of the most egregious, wasteful loopholes and special-interest carve-outs on the table,” Patty Murray, chairwoman of the Senate Budget Committee and the lead Democratic negotiator, said on Nov. 5.

The clash with Republicans over revenue stands in the way of the lawmakers reaching a deal by a Dec. 13 deadline. Democrats have long urged Republicans to agree to scrap at least some of the tax preferences, while Republicans argue that doing so would undermine efforts for a broader tax-code revision.

In addition to closing what Democrats call the “John Edwards/Newt Gingrich loophole,” the party’s list of options includes carried-interest treatment that allows hedge-fund managers and private-equity advisers to pay a 20 percent tax rate on their income instead of the nation’s top income rate of 39.6 percent. Ending that break would save more than $17 billion over a decade, according to the Democrats’ estimates.

Corporate Jets

Another lets U.S. companies deduct their expenses when they send their plants overseas, which Democrats say encourages offshoring of American jobs. It would raise $200 million. Ending preferences for corporate jets and subsidies for yachts and vacation homes, combined, would bring in another $19 billion.

While budget aides say the two sides are finding some areas of compromise on spending cuts, such as farm subsidies, Republicans say ending tax preferences could hurt efforts by House and Senate tax-writing committees trying to strike a broader deal to revamp the code.

Representative Paul Ryan, the lead Republican negotiator and chairman of the House Budget Committee, is arguing against including any tax measures as part of a deal to establish an annual budget and to replace some of the $1 trillion in automatic spending cuts now in effect that are disliked by both parties. The 29-member panel, which first met on Oct. 30, will hold its next public meeting on Nov. 13.

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