Gov. Linda Lingle said yesterday that at least $120 million of the state's budget surplus should go to tax relief, but state lawmakers are working with a much smaller figure as they near the end of negotiations on the budget.

With only a few days left in the session, state House and Senate conferees are close to finishing the budget and deciding how to spend a surplus that has grown to more than $600 million.

Tax relief remains on the table but the amounts being discussed are well below what the governor has outlined.

Lingle, in her State of the State speech in January, called for nearly $300 million in tax relief but yesterday indicated she would agree to much less.

"I'd like it to be substantial relief and I think 20 percent of the surplus would be the minimum figure that they should look at, so that would be about $120 million in tax relief," the governor told reporters.

But lawmakers are looking at providing $20 million to $30 million in tax relief through an increase in the standard income tax deduction and a tax credit for the working poor.

Another proposal would use about $47 million to expand income tax brackets so more people would pay lower tax rates.

House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), and Senate President Robert Bunda, D-22nd (North Shore, Wahiawa), have said tax relief is possible but the details remain fluid.

House, Senate and Lingle administration officials described the different possibilities but cautioned that they are subject to change.

Increasing the standard income tax deduction to 50 percent of the federal level would cost the state $19 million a year in lost tax revenue and appears to have the broadest political appeal. Lawmakers might opt to increase the deduction to 40 percent of the federal level — for $10.8 million — if they want to make room for other spending.

But Say has not appointed conferees on the idea and instead seems interested in reviving the income tax bracket expansion, which had been off the table until the past week. Adjusting the brackets upward by 25 percent would cost $47 million and would help about 80 percent of people who file tax returns.

A state tax credit for the working poor at 10 percent of a similar federal credit would cost $11.6 million and has been popular in the House.

Senate lawmakers believe a combination of the standard deduction and the tax credit could have the best shot at passing, since it costs less and would mainly help the poor.

But bracket expansion would help people across the economic spectrum, including middle-class taxpayers who both political parties will appeal to during election season.

"I think the simplest thing would be to do something with the standard deduction," said state Sen. Brian Taniguchi, D-10th (Manoa, McCully), the chairman of the Senate Ways and Means Committee, who said he is also open to the other ideas. "We have tried to cut some space in our financial plan for tax relief."

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com and Gordon Y.K. Pang at gpang@honoluluadvertiser.com.