In Hawai'i, you have to be very hard-working taxpayers in order to survive, and Democrats want to do what's fair and deserving for them. So, when we asked our constituents their opinion on a tax rebate, whether it be $25 to $100 or more, almost every person said, "Keep the money. I don't want it back. Use it to fix our schools or repair our roads."

This directive from the majority of people we talked to forms the core of our approach to tax relief for the 2007 legislative session. We need to take a common sense approach that will include three main objectives: 1) provide a fair tax rebate to Hawai'i taxpayers; 2) implement tax-relief measures that benefit those who need it most; and 3) spend the surplus wisely on large-scale improvements — improvements that are the responsibility of government to provide, and that will strengthen the social fabric of Hawai'i.

In providing a tax rebate, the governor's proposal does not make sense to us — especially giving back $25 to those making $100,000 a year. While, initially, everyone may want money back from their government, we cannot imagine that $25 will be meaningful to people making that amount of money. This year, the Legislature is mandated by the state Constitution to provide a monetary rebate to all taxpayers. Most people agree that giving back a token amount, such as $1, is a wasted effort. Therefore, while we have not decided upon a dollar amount, we can say that we would like to propose something greater than a token, and, if possible, to scale the rebate so that the greatest amount will go to the neediest of our citizens.

In addition to a rebate, Democrats have introduced a number of bills — one signed by almost every member of the majority — providing for a state earned income tax credit, called the EITC. We favor the EITC over the various Republican proposals, such as eliminating the General Excise Tax on 11 basic foods, because the EITC specifically focuses on low-income working families; again, this is the group that needs it the most.

Last year, the Legislature approved a $50 million tax relief package by raising the standard deduction to 40 percent of the federal standard deduction level, and widening the individual income tax brackets by 20 percent. This year, of all the forms of tax relief being proposed by either the governor, the majority or minority caucus, we believe that the EITC can make the greatest difference in helping Hawai'i's working poor with our high cost of living. Here's why: The earned income tax credit is one of the most effective anti-poverty tools in the United States. As its name implies, the amount of the credit will be determined by the amount of income earned, therefore, the program is structured to decrease and phase out for individuals who start to earn higher wages. It provides a greater amount of credit for families with children. It is a program that discourages welfare, and encourages people to stay in the work force and remain productive members of our society.

Further, economists suggest that the economic impact of the EITC on a local economy is beneficial. Every dollar received by low- and moderate-income workers is thought to have a multiplier effect of between 1.5 to 2. That means that for every dollar in EITC funds received by a working family, $1.50 is spent locally and generated back into our economy.

In 2003, the city of San Francisco adopted a supplemental program to the federal EITC, called the San Francisco Working Families Credit. Not only did the program put more money in the pockets of families who live in a high-cost city, but it helped to connect these families to the financial services and asset building opportunities they sorely need, and that they would never have received through other tax relief measures. We like this approach and think a state EITC would work in Hawai'i.

Through the years 1998-2002, Democrats approved and implemented a series of tax cuts that totaled more than $750 mil-lion. In 1998, the Legislature passed a law that cut income taxes over a four-year period, reducing the top tax rate from 10 percent to 8.5 percent, and expanding the tax brackets. In 1999, the general excise tax was cut to reduce the effect of pyramiding on service transactions. A combination of these tax cuts resulted in the largest tax relief package in the state's history.

This year, even though our economy is slowing, a tax rebate is forthcoming and well deserved. In addition, we would like to have a public dialogue on the best investment of surplus funds, and how we can use the money wisely toward building a better Hawai'i.

For example:

Let's make sure that we're prepared for any number of disasters, natural or man-made, that will hit our shores.

Let's give every child in Hawai'i the best possible chance to succeed by properly funding and taking pride in our public school systems, the Department of Education and the University of Hawai'i.

Let's embrace innovation. Last year, House Speaker Calvin Say introduced a bill to establish a $100 million Innovation Fund that would be a catalyst for the development of a technology and life sciences industry — what some have called an economy of ideas. This year, Gov. Linda Lingle renewed the call for an Innovation Fund as part of a comprehensive Innovation package. Where we differ with the administration is that we cannot support funding $100 million through the Employee Retirement System fund. We cannot afford to play with someone's future retirement by making risky investments.

We welcome the challenge of balancing the needs of today with planning and investing for the future. We know we don't have a monopoly on good ideas, and we think it's healthy for Republicans and Democrats to have a meaningful debate on tax relief as together we work through the legislative process.