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Income Tax Central to Tenn. Governor's Race

For all candidates' talk about education and health care, it is the income tax — the most explosive issue in Tennessee politics — that is dominating the tight race for governor.

Republican Rep. Van Hilleary built his campaign around the issue, declaring "I'm not for any tax increases.'' Democrat Phil Bredesen believes better budget management will solve Tennessee's financial woes, but won't rule out supporting an income tax in the future.

The two views are in line with voters, who either vehemently oppose imposing an income tax or believe it is a fairer way to raise money than to keep raising the sales tax.

"The income tax is certainly an underlying force in this election,'' said Ed Cromer, editor of the Tennessee Journal, a weekly newsletter on state politics.

Cromer said the election will come down to two things:

"Whether Bredesen can sell the idea that he's the capable manager who can keep the state out of trouble or whether Hilleary can sell that he can give the state a fresh start and keep it free of an income tax,'' he said.

The race is a close one. A Mason-Dixon poll of registered voters conducted Oct. 21-23 showed Bredesen with 45 percent and Hilleary with 42 percent, well within the margin of sampling error of 4 percentage points.

Four years ago, Republican Gov. Don Sundquist easily won re-election after campaigning against an income tax. He later said the tax appeared to be the only equitable way to raise new revenue, and was promptly abandoned by his own party and booed in public.

Hilleary has ridiculed his fellow Republican over the issue, running a TV commercial morphing Bredesen's name and Sundquist into "BredeSundquist'' to portray both as untrustworthy tax-and-spenders. Sundquist is barred from seeking a third term.

Hilleary, 43, also reminds voters that Bredesen boosted property taxes three times during his eight years as Nashville mayor, gave corporations tax incentives to move to the state and increased water bills to help pay for the Tennessee Titans' football stadium.

Bredesen, 58, makes no apologies. He said the tax increases paid for new schools and libraries, and the corporations brought jobs. He said the Titans helped the city's economy, image and pride.

The Democrat says Hilleary is another backbench conservative congressman with no business experience — just like Sundquist, who beat Bredesen for the governorship in 1994.

Hilleary's only job before Congress was helping to manage his family's textile business. He served two volunteer stints in the Gulf War as an Air Force Reserve navigator before his 1994 election to Congress.

Bredesen, a native of Shortsville, N.Y., moved to Nashville in 1975 and served two terms as mayor in the 1990s. In the 1980s, he founded HealthAmerica, built it into the nation's second-largest health maintenance organization and sold it for $47 million.

He touts that experience, saying he knows how to turn around troubled health care companies. He says TennCare, the state's $5.9 billion state-federally funded health care program for the poor, disabled and otherwise uninsured, is a giant, mismanaged HMO.

Both candidates say reforms to TennCare and education, creation of jobs and new faith in government are top priorities.

And then there is the tax issue.

A four-year legislative battle culminated in July, when a bill to impose the income tax fell short by five votes in the Tennessee House. Lawmakers instead passed the largest tax increase in state history, most of it coming from a sales tax hike from 6 percent to 7 percent.

Hilleary suggests voters shouldn't trust Bredesen, saying he has broken a state law that prohibits a candidate from spending more than $250,000 of personal wealth on a campaign. Bredesen has spent $3 million.

State election officials don't enforce the law because the state attorney general said it is unconstitutional. Bredesen said that gave him the freedom to contribute to his campaign while Hilleary got White House help to raise more than $1.5 million, primarily for attack ads.

Boyce Magli, a real estate agent in Franklin, said Bredesen appeals to some Republicans because of his business background.

"I've always been distressed we don't have more business people running for political office,'' Magli said. "I think those skills will help keep Tennessee taxes down and I don't know what kind of skills Van Hilleary brings to the table that would do that.''

However, Randy Curtis, a gift shop owner in Woodbury, said Bredesen seemed "on a spending rampage'' as mayor and he didn't "really want to turn him loose as governor.''

"It seemed to me that what he did to Nashville — there were some good things but more bad,'' Curtis said.