Lingle said a $486 million budget surplus left over from the last fiscal year should be returned to taxpayers, although she did not say whether that would involve cash rebates or credit.

"Every taxpayer in the state should enjoy a relief," Lingle said at a news conference at the state Capitol, adding she would formally ask legislators to back her request during her State of the State address in January.

The Hawai'i constitution mandates tax refunds be issued when there is a 5 percent excess in the state's general fund for two consecutive years. That has happened 17 times since 1978, with the last two times in 2001 and 2002. The current fiscal year, which began July 1, is projected to have a surplus as well, she said.

The projected refunds wouldn't be released until 2007, but Lingle said she hopes lawmakers would pass the tax cuts next year.

"Let's not wait, let's do it now," Lingle said.

Previous tax cut proposals by the Lingle administration introduced during the past three legislative sessions have been unsuccessful.

House Speaker Calvin Say said although "we are open to the governor's tax cut proposals," he had some reservations about approving them.

"We also want to consider the needs that require attention," said Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), in a statement. "When your household budget is doing well after a long period of struggle, would you automatically go out and spend all your surplus money?"

Say said the state needs to deal with building a new prison, correcting problems at the Hawai'i Youth Correctional Facility, investing in public education, affordable housing, and providing economic development incentives to keep the economy on course.

But Lingle, who noted that the state's Council on Revenues would meet again on Sept. 2, said the outlook is looking good enough to allow the state to grant the cuts while also catching up on overdue road and harbor repairs and funding of schools.

Sen. Fred Hemmings, R-25th (Kailua, Waimanalo, Hawaii Kai), said the state should follow the governor's approach and said lawmakers should meet in special session to vote on tax relief.

Lingle wants to increase the standard income tax deduction to $2,500 from the current $1,500 for individuals filing a tax return. Couples filing a joint return would be able to deduct $5,000 instead of the current $1,900.

The governor also wants to expand tax credits on food, medical services, and nonprescription drugs. She wants to increase the $40,000 eligibility threshold she proposed last session so more families may be eligible for credits on those services.

Refundable tax credits to employers and families who purchase long-term care insurance plans are also on Lingle's agenda. She would like to see a maximum credit of $1,000, or 50 percent of the premium cost.