Los Angeles Times: Talk Radio Thwarts Tennessee Income Tax

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THE NATION
Talk Radio Thwarts Tennessee Income Tax
Politics: Despite economic crisis, legislators are kept from raising taxes by a
protest outside the state Capitol.
By JEFFREY GETTLEMAN
TIMES STAFF WRITER

July 23 2001

NASHVILLE -- As key Democrats and Republicans huddled behind closed doors trying
to break an impasse over a proposed new Tennessee income tax, 2,000 protesters
rushed up the Capitol steps, screaming, "No means no!" and smashing a few
windows.

It was a bona fide tax revolt, and it worked. But it was hardly spontaneous.

Instead, the tax-thwarting protest was the handiwork of two talk show hosts who
took to the airwaves and put out an urgent S.O.S. "They're trying to raise our
taxes! Get to the Capitol! Quick!" was what Phil Valentine and Steve Gill, the
town's leading conservative radio personalities, told their listeners.

Sure enough, lawmakers passed a budget without any new taxes, despite a
deepening crisis fueled by an economic slowdown and a tax structure so flawed
that politicians have raised rates 61 times in the last 30 years just to keep up
with the demand for services.

The lesson isn't that a state income tax is unpopular; it's that Tennessee now
has three political parties: There are Democrats. There are Republicans. And
then there is talk radio. The protest this month was a coming of age for the
state's conservative shock jocks and the high point of a long, well-organized
battle against the effort to bring an income tax to Tennessee, one of the nine
states that doesn't have one.

"These radio guys have shown they can rally the support," said William Lyons, a
University of Tennessee politics professor. "They've become actors on the
stage."

And the play continues. Next month, the tax issue is expected to return to the
state Legislature. And so are the protesters.

"We're the voice," Gill said. "But the people are the volume."

Tip Came From Inside

Gill and Valentine have forged some key alliances with other stations across the
state and, more important, with conservative lawmakers. It was a Republican
state senator who tipped them off July 12 about the back room negotiations.

"Income tax vote should be around 5," wrote Marsha Blackburn in a frantic e-mail
sent from the Senate floor to Valentine's radio station. "TIME FOR TROOPS."

Some senators are now talking about censuring Blackburn, a freshman from
Nashville's wealthiest suburb, for instigating the rowdy protest, which never
got violent but damaged state property.

The two radio hosts say they're sorry about the three windows that got smashed.

Steve Gill is a 44-year-old trade lawyer, a former White House fellow and an
aspiring Republican politico who came within 900 votes of winning a
congressional seat in 1994. He does the morning drive, 5 to 9, on Nashville's
WWTN SuperTalk.

Phil Valentine, 42, is a sometime actor, sometime singer and a guy who likes to
dress up like Elvis and pass out doughnuts on the streets of Nashville. His
afternoon talk show on WLAC is ranked No. 1 in the market.

The two use unorthodox methods--like steering protesters to lawmakers' homes and
telling listeners to mail their legislators used tea bags. (The Boston Tea
Party, get it?) They see themselves as a conservative counterweight to a
typically liberal media.

"At least we're up front about our bias," Valentine said.

They're well schooled in tax policy, the hot issue right now in Tennessee.

One of the state's problems is that it is so dependent on the sales tax, which
targets goods, not services. As the state has shifted from manufacturing to
service industries, such as health care and distribution (Federal Express is
headquartered in Memphis), tax revenues have declined as a percentage of the
economy.

Meanwhile, Tennessee is spending more money than ever, undertaking ambitious
social programs like TennCare, a subsidized health care plan, and building more
prisons and schools. That has pushed the state budget up 87% in the last 10
years, an increase far exceeding population growth and inflation.

Enter the downturn. As in most other places, business has been a little off in
Tennessee the last six months, and unemployment has risen from 3.9% to 4.3%. The
tax receipts the state was counting on never materialized.

For example, sales tax revenues have come up $230 million short of projections,
a 5% shortfall.

"It may not sound like a lot," said Gerald Adams, one of the governor's budget
advisors. "But it's a big deal when you're on the margin."

Making Ends Meet

Economists say there's a simple solution: a state income tax. Revenue generated
by income tax tends to keep pace with the economy. Just look at the federal
budget.

Most of the states without an income tax have other revenue generators that make
up for it: oil in Texas and Alaska, tourism in Florida, slots in Nevada.

The most recent state to add an income tax was Connecticut in 1991, and it drew
huge protests.

That's what Tennessee lawmakers were trying to avoid last week when they met in
secret at the Capitol one final time to work out a budget compromise. The
leading proposal was a flat-rate income tax of 3.5%, followed by a nonbinding
referendum on the issue in 2003 and more exemptions from the sales tax.

Democrats control both chambers of the Legislature, and many Democrats supported
the proposal. The trick was co-opting a few more Republicans to get a majority,
said Robert Rochelle, a Senate Democrat.

It's not clear how close they were when the protest exploded. Rochelle said the
talks were difficult, though lawmakers hadn't given up yet.

But as the crowd began to surge up the steps from the grassy plaza in front of
the Capitol to the doors of the Legislature, which they pounded, demanding to be
let in, the mood inside changed.

"At that point, we couldn't even hear each other," Rochelle said. "It became a
tone of 'Let's just pass this thing and go home.' "

In the end, the Senate voted, 20 to 11, for a budget without an income tax. The
house then passed it, 71 to 25.

The $19.6-billion budget has no new taxes. To make ends meet, lawmakers used
$560 million of state tobacco settlement money, including funds they haven't
received but expect to get next year. Several education programs were cut, and
state college tuition will likely be raised 15% next year. Some commentators
called it an "Armageddon budget."

Gov. Don Sundquist, a second-term Republican who twice campaigned on a
no-income-tax pledge but has since reversed his position, promises to veto the
budget. He also issued a statement criticizing "some of the radio talk show
hosts . . . who encouraged disruptive behavior."

Valentine and Gill call him "Darth Sundquist." "And I was touched he even
mentioned us," Valentine said.

Times researcher Edith Stanley contributed to this story.

Copyright 2001, Los Angeles Times