In addition, the Democratic amendment will include compromise jobs programs worked out between the chairs of the Senate and House Veterans Affairs committees, Sen. Patty Murray, D-Wash., and Rep. Jeff Miller, R-Fla.
These include money for veterans' job training and education at community colleges and trade schools, job counseling for troops before they leave the military, and expanded benefits to disabled veterans.
Senate aides said the job training proposal was expected to cost around $1 billion. To pay for the veterans' tax credits and training, the measure would extend a fee the Department of Veterans Affairs charges for guaranteeing home loans, the aides said.
The veterans language is supported by groups including Disabled American Veterans and Iraq and Afghanistan Veterans of America.
By 405-16, the House approved a bill two weeks ago repealing the withholding requirement for government contractors. It would cost $11.2 billion in lost revenue over 10 years, which the measure would recoup by making it harder for some Social Security recipients to qualify for Medicaid under Obama's health care overhaul law.
Repeal supporters say the measure would leave companies with more money to expand. Many economists say any impact would be minor, noting that the withholding doesn't take effect until 2013.
Days before that House vote, the Senate voted narrowly against debating a GOP version of the government contractors' measure after Republicans proposed paying for it by cutting unspecified spending by federal agencies, drawing strong Democratic opposition.
The withholding requirement became law five years ago, enacted by President George W. Bush and a GOP-run Congress in response to investigations showing that thousands of contractors were behind on billions of dollars in taxes.
Sen. Jay Rockefeller, D-W.Va., was the only "no" vote. An aide said he favors the jobs initiatives but opposes using health care cuts to pay for them.
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