TOPEKA — Backers of a bill that would expand tax incentives for companies that create new jobs said the measure would generate more tax dollars than the state would give away.

“I would assert that after five years, we will end up with $37 million more in taxes to the great state of Kansas,” said Rep. Marvin Kleeb, R-Overland Park, defending a proposal that critics have said would further drain state coffers during the worst fiscal crisis since the Great Depression.

Kleeb told the Senate Commerce Committee that expanding the income tax incentives offered under the Promoting Employment Across Kansas, or PEAK, program to new types of businesses would generate more revenue than it would cost.

The $37 million estimate was based on assumptions that the program would create about 4,000 jobs a year at an average wage of $40,000 and that the people who got the jobs would spend 65 percent of their incomes on goods and services subject to Kansas sales tax.

But Kansas Revenue Secretary Joan Wagnon said the assumptions were based on wishful thinking.

“His fiscal note is contrived and you can quote me on that,” Wagnon said after the hearing. “He picked assumptions that would prove his point.”

The PEAK program allows qualifying businesses to retain 95 percent employees’ withholding taxes for up to five years. The bill under consideration – HB 2538 – would allow in-state businesses that create new jobs and those acquired by out-of-state companies that keep jobs in the state to qualify for the tax benefits.

The bill is in the spotlight because of the broader debate between those who believe the state’s tax base has eroded too much over the last 15 years and those who believe that additional tax breaks will make Kansas more competitive with high-growth states. Some business groups are pushing for repeal of the corporate income tax.

“I don’t know that we’re winning today when it comes to competing for jobs,” said Jason Watkins, a former Republican legislator from Wichita who now represents that city’s Chamber of Commerce, which he confirmed is among the organizations urging legislators to look at repealing the income tax.

Wagnon is on the other side of the issue along with Gov. Mark Parkinson, who late last week criticized Kansas lawmakers from going on a “tax cutting binge.”

Parkinson, a Democrat, said that a growing list of sales, income and property tax cuts or exemptions granted largely to special interest groups since the mid-1990s have cost the state an estimated $9 billion.

Revenue shortfalls over the last two years have forced Parkinson and the Legislature to cut state spending by about $1.3 billion. They still face a projected $500 million deficit in the coming budget year.

Parkinson last week said he found it “unbelievable” that lawmakers were considering an expansion of the PEAK program, which the Department of Revenue estimates will cost the state $6.1 million next year and $95.7 million over five years.

Parkinson hinted that he would veto the bill, if it reaches his desk. It has already passed the House.

“Our general policy is never to announce what we’re going to do with a bill. But I think it’s fairly clear that we don’t need to cut taxes anymore,” he said.

Kleeb said he would like an opportunity to change the governor’s mind about the bill, which he said embodied a new, more targeted approach to economic development. Unlike incentives that are given as upfront inducements to businesses, Kleeb said PEAK benefits only flow to companies that create or maintain jobs in Kansas.

“This is just plain good policy. This will create jobs,” Kleeb said.