It's easy enough to lead during good times. Republican Linda Lingle, closing in on the final years of her turn at governor, has the unhappy but challenging task of leading in bad times.

Lingle outlined the work ahead in a sobering State of the State speech this week to lawmakers. The governor said her budget people project a deficit of some $76 million for the fiscal year ending in June — not that overwhelming — but much heftier deficits of $315 million and then $550 million in the two years to come.

The only obvious direct responses are to raise more taxes or cut spending.

The third choice, and it should be part of any package, is to stimulate the economy so that the shortfall in tax collections diminishes or disappears. But this requires speculation and policymakers are required to be realistic.

Despite the grim economic news, the tone at the Legislature seems decidedly anti-tax hike. Fair enough, but watch closely: While our leaders may say they won't raise our taxes, they are more than willing to consider, (a) redirecting taxes already collected for one purpose to another, and (b) raising taxes by reducing tax benefits now on the books.

In Category A come such ideas as diverting part of the Honolulu transit tax to the state or dipping into the hurricane relief fund or the rainy day fund.

Category B may produce the biggest political firestorm of the session. High on the list is the very generous high-tech tax credit, often called Act 221, which gives up to 100 percent tax credits to investors willing to put their money into fledgling qualified high-tech companies. But Act 221 is not alone in the list of credits created over the years by legislators.

House Speaker Calvin Say has already identified that list of tax credits as a possible tool for helping balancing the books. How much does the state give in tax credits each year?

That's hard to say. A 1995 study suggested that individuals and corporations claimed more than $200 million a year in tax credits for everything from investing in low-income housing to putting in solar panels or infant car seats. That number is up by at least a third today since 221 annually generates around $100 million in credits all by itself.

Yes, a lot of good is created through these credits. But it also costs the state a big chunk of cash. There is no doubt that our financial headaches could largely be eliminated if the tax credits were repealed or cut back.

But are lawmakers willing to pay the price?

Jerry Burris' column appears Wednesdays in this space. See his blog at blogs.honoluluadvertiser.com/akamaipolitics. Reach him at jrryburris@yahoo.com.