FULL INTERVIEW: Missouri Governor Kehoe on Amendment 5

[00:00:00] Speaker 1: Governor, thank you so much for joining us. We appreciate it. [00:00:02] Speaker 2: You bet. [00:00:02] Speaker 1: So we're talking about Amendment 5, of course, widely seen as your brainchild, your idea. What exact problem do you believe that this will solve for the state of Missouri? [00:00:11] Speaker 2: Well, number one, we ran on having a different tax code here in Missouri for our Missouri citizens. And if you want to look at our state in the form of a business, we need to be competitive with the competitors around us, the other surrounding states. We think that giving Missourians more of their money that they earn to keep in their pocket is better for their families, but it also helps improve our economy. It makes us competitive with those other states, and it allows us to really actually have a chance to grow our population and grow what our economic outlook picture looks like. [00:00:41] Speaker 1: Since this proposal was initiated, have you heard from CEOs or from company leaders, business leaders who have committed to moving here if this passes? [00:00:48] Speaker 2: Multiple. Missouri is fortunate to host one of the World Cup sites, and we've had opportunities to meet with international and national companies through that experience, and even before that when I was working on economic development. I think there's not a conversation I've had with a CEO or a family-owned business who either is already located here or considering moving here telling me that they love the tax policy. Literally, that's almost 100%, I'd say. [00:01:15] Speaker 1: Can you tell us one of those companies? [00:01:17] Speaker 2: None that are, I can't, you know, we have a lot of issues where we can't talk about who might be coming here. But I think it's safe to say that if you talk to any business leader who has multiple employees, whether it's a family-owned company or a publicly traded company, being able to tell those employees they get to keep that tax that they're sending in, they'll have more disposable income. And then for the C-suite of that company, those managers want to live in a state where they're not paying income tax. So if you just think that through a little bit, you'll come to your own conclusion that businesses and business people would really like to have this opportunity. [00:01:50] Speaker 1: Of course, the other component of reducing the income tax would mean generating revenue in other ways, namely potentially in sales taxes. Can you guarantee, though, that all Missourians would benefit from this, whether they're low-income, high-income, seniors, or military? [00:02:03] Speaker 2: Yeah, you can look at all of the models that we've had out there that other groups have put out there. The White House Economic Policy Group has a couple of models out there. Our sales tax code is over 100 years old. No surrounding state around us has that old of its sales tax code. So updating and modifying that sales tax code to make sure it's on a fair and level playing system enables us to give Missourians their money back through the income tax cut. [00:02:27] Speaker 1: State Auditor, fellow Republican, of course, has endorsed Amendment 5 as well, but has also issued some warnings about Missouri's budget situation, calling it a dire situation. How would you, for those who might say, how do you justify changing the revenue structure when facing that dire budget situation? What would you say to that? [00:02:44] Speaker 2: Well, let me just say, Auditor Fitzpatrick does a great job. He knows Missouri's budget, I think, better than almost anybody. Scott's a good friend, and I trust his opinion. But Scott would agree, with what I'm saying, we don't have a revenue problem in the state. We have a spending problem. And so it's not about the revenue issues, it's about how much money we're spending. So reducing that spending problem, reducing the additional lines that have been added to our budget since just 2021, that's how we get our budget in check. Then use a tool that spurs our economy like we believe the income tax elimination and phase-out will do. That's how you fix that. [00:03:18] Speaker 1: The auditor was obviously critical of the legislature, though, for increasing spending in this past legislative session. So what do you think is the area where we would need to make drastic spending cuts moving forward? [00:03:28] Speaker 2: Yeah, you know, look, we have costs to continue in many of our social programs. So I'm not saying whether they're needed or not needed, that's another debate. But just in health services out of our budget, almost $25 billion to spend on that, $10 billion in education. So there's a lot of big chunks in there that take up a lot of that money. We've got to continue to look at what Missourians entrust us to do, what's really good for our communities, and make sure that's serving the people it's supposed to serve, and then tighten our belt up. Any of the new programs that have come in the last several years, let's look at are they a good return on investment for Missourians, or do we need to actually take action on some of those? [00:04:05] Speaker 1: Some critics of Amendment 5 have called it vote now and details later. Would you have preferred there have been more of a detailed plan to say we're going to phase out the income tax and replace it with these XYZ income and revenue generators? [00:04:18] Speaker 2: Well, we utilize the model we're using on purpose, because should Missourians approve this, and I hope they do in August, then the General Assembly, in a very transparent, wide-open committee process, will work through designing what the new tax code looks like, again, over 100 years old. Those are men and ladies who represent Missourians all across the state. So what better way for them to have input than to have their state representative, their state senator, representing them in this tech capital as we work through what that plan looks like. I'm sure the media will be covering it. It will be very transparent and very open. [00:04:52] Speaker 1: You have said, though, no increases for agriculture, health care, or real estate. That's correct. Can you guarantee that? [00:04:58] Speaker 2: I can guarantee that. I will not sign a bill that has any of those increases or changes to what they currently have in the tax code system, and I can tell you that we have a General Assembly that appreciates those three industries as well. I don't think anything would even get close to my desk with it. [00:05:13] Speaker 1: How about other things, though? Groceries or prescriptions. People have concerns that their everyday items are going to go up in cost. [00:05:18] Speaker 2: Well, sure. Prescriptions would fall under the health care plan. Groceries already don't have a state sales tax on. So some of the things that people are worried about already fall into an existing structure. We believe that this will help us look at what people are buying now that weren't in business 100 years ago. And likely, anything you've bought or done business with in the last 30 days was not around 100 years ago. So just updating that tax code, like our surrounding states have done, making sure we are never out of competition with those surrounding states and what that looks like, and keeping Missouri at an advantage, I think, is important. [00:05:51] Speaker 1: Can you name two or three things that will be taxed that aren't currently? [00:05:54] Speaker 2: Well, I'll let the General Assembly take a look at that. But if you think of electronic things, I'm old enough to remember we used to have a store called Peaches, where you walked in and you bought a record and you went to the store and you checked out at the register. Well, now you download music, so you're not checking out of the register, you're not paying sales tax on it. So the e-commerce economy, and nothing against those companies, they're doing what the model suggests. They haven't been able to collect the resources that Missourians are used to paying and now probably need to be updated to look at again. [00:06:27] Speaker 1: There are things, though, that people are like, "I'm concerned whether or not if I go get a haircut or if I have to hire a painter or a plumber." Do you expect there's going to be a pretty robust debate on what things could be taxed moving forward? [00:06:38] Speaker 2: Well, sure. That's why I think it's good to have an open and transparent debate here in the legislature. You know, the legislature has five years to do this. If they can't get it done, it goes back to the way we are now. So there is a limit to how long this can take to get done, and I believe that will happen in a very open and transparent process. [00:06:54] Speaker 1: Yeah, and let's talk about the triggers. Obviously, it's a phase-out, gradual, unlike, say, for example, what Kansas did. What will your role be in determining what exactly those triggers will be? [00:07:04] Speaker 2: Well, we learned a lot from what Kansas did. Quite frankly, they did it in a manner that just didn't work. So we've looked at what Kansas did, and we've used some other tax policy experts from around the United States to look at what a responsible way would be. And what we've told Missourians, and what's actually in the constitutional measure that they'll vote on, constitutionally, this legislature can never change the tax code by one penny more than it is to offset the income tax refund that Missourians will get. So there is a definite safeguard there to make sure Missourians are protected. [00:07:34] Speaker 1: So there is not a scenario in which other taxes might go up, but income tax does not fully get paid. [00:07:39] Speaker 2: As the legislation will work through, one has to follow the other. So the bill that they would send me would require, as the sales tax code changes in that same calendar year for that particular year, the income tax cut would have to be mirroring that. [00:07:53] Speaker 1: For those local leaders who say this might impact them, obviously, they have to change revenue if this passes as well. If their revenue increases, they have to find other ways to cut taxes. Are you speaking with them? And what are you advising them on how they would do that? [00:08:08] Speaker 2: Yeah, well, what they have to do is just remain neutral. So if they have a taxing district that might benefit from a broader or wider sales tax base, they can't just automatically take that gain. They have to roll those levies back to where they're neutral where they are today. So they won't lose any money. That's not right. The funding formula for public education shouldn't say the funding formula, but public education funding is also protected in the Constitution that that can't be touched if there's tax assessments related to education in those particular districts. So there's protections put in place. If people would really look at the details of the bill, they'll find out that we did this as responsible as you can do it. [00:08:46] Speaker 1: The ads Pro Amendment 5 are saying the property taxes will go down. Is that a guarantee, though, for people who are going to vote for this? That may not happen. Is that correct? [00:08:56] Speaker 2: Well, again, counties will have to make that decision on a local level. I don't think it's the role for state to play in that. But certainly property taxes for everybody in Missouri, including myself or top of mind, this will be an opportunity to have an additional revenue source that they'll have an opportunity to roll those property taxes back. That'll be a county to county decision. We believe that will be one of the places counties will go because it's so sensitive to Missourians right now. [00:09:18] Speaker 1: Another component of the ads is that corporations would pay their fair share. How would corporations pay more of their fair share? [00:09:24] Speaker 2: Well, as again, it's the tax code that doesn't account for kind of our e-commerce world that we live in right now. And so the some of those larger tech companies that have an online presence, for instance, because our tax code doesn't require them to collect taxes, they're not collecting taxes. So this would allow them to us to have the mechanism to make sure they pay their fair share. [00:09:44] Speaker 1: But in that scenario, you mentioned the corporation wouldn't pay the tax, it would still be the consumer. [00:09:48] Speaker 2: Yeah, right. It's it's really about I call it the brick and mortar Fairness Act. If I have a brick and mortar store on Main Street anywhere in Missouri, and somebody comes to me, I'm paying sales tax when I buy that tie. But if I go online and do it, I might not be able to. So I believe this also presents fairness to our small businesses across the state. [00:10:05] Speaker 1: And the ads also mentioned data centers. Do you think this really does impact data centers? Is it possible that their exemptions will also be removed? [00:10:13] Speaker 2: No, the data center so far have not utilized the ones that we're aware of have not utilized any of our economic development tools in the toolbox that Missouri would normally talk to a large investment like that. The data center piece more about and you'd have to ask the people who designed the ad. So I didn't do that. But I've seen it like you have. You'd have to the assumption I have is that they're an e-commerce type space that might have to make sure that they're collecting the proper tax as well. [00:10:38] Speaker 1: And as far as those who have designed the ads, their C4s, as it's often referred to as a dark money pack. Do you think it should be disclosed who is donating to these Amendment 5 pro ads? [00:10:51] Speaker 2: Yeah, I think the whole disclosure issue is something that everybody talks about, especially when they're not on the winning side of something. If you're the competition here and you're not doing good, you're going to start bringing up dark money, where does this money come from, etc. That's because on the policy issues, on the facts, they can't win and they know that. And I think that's a shame they have to go to those tactics. [00:11:10] Speaker 1: Shouldn't voters, though, know who is behind this measure? [00:11:12] Speaker 2: Yeah, voters need to be comfortable for a candidate committee that might use those or any other form of election. Voters need to be comfortable with where they're at. It's the way the laws work, unfortunately, in the state and the country that created some of those things long before you and I came along and different people take advantage or not advantage of those as they see fit. And do you think that's something that should change? Yeah, I'm not a big fan of meddling with people's privacy right now. So if somebody wants to remain private and invest in something and a voter doesn't like being able to find out who that is, then they should make that decision that makes them uncomfortable. [00:11:48] Speaker 1: And of course, on the anti amendment five side is the Realtors Association that is primarily funding that campaign. Were you surprised to find that out? They mentioned that they have tried to speak with your office and kind of have conversations about this. What do you make of the fact that they're opposing it? [00:12:02] Speaker 2: Well, we've had the Realtors in here multiple times since one of the reasons we said and then the legislature have said and I said in my state of the state that would this whatever the revised tax code look like would not involve anything to do with real estate. They wanted it put in as a measure of the Constitution. I think that's the wrong place to put that because then you have judges deciding what's real estate and what's not real estate. The way the process is set up. Now, the local elected officials that their members, those Realtors have a relationship with there in the Capitol. have an actual chance to have a voice in what this looks like. We think that's a much better and more transparent way. [00:12:36] Speaker 1: Some organizations haven't weighed in yet as far as I know. So correct me if you think I'm wrong, but the Farm Bureau and the Chamber of Commerce Municipal League hasn't weighed in one way or the other. Are you in conversation with them? Does that surprise you or would you like them to? [00:12:48] Speaker 2: Look, all stakeholders that could have been affected, we brought in this office before we even filed the legislation for the House and Senate file the legislation and promised them a seat at the table. Should this pass by the voters. So no matter who that organization is, even if their organizations are against this measure, I'm going to stick to my word. They're going to be involved in what this new tax code could look like and it will not be easy, but we're going to work through it. [00:13:14] Speaker 1: What would you say to somebody who might say this is a referendum on trust in government? Again, as opposed to having a very detailed plan about what will go into effect, it's saying trust your lawmakers. Do you think people actually do trust their lawmakers right now? [00:13:26] Speaker 2: Well, they're the men and ladies they elected to represent them down here. And again, they're the same representative or senator you see at your son or daughter's basketball game in the grocery store at church. And it gives Missourians a real connection to talk to those people. [00:13:41] Speaker 1: Just to be clear for voters, though, some taxes may go up under this. [00:13:45] Speaker 2: There's a couple of models out there. We think widening the tax base will be the first thing that we'll look at again with the with the input of some stakeholder groups, but more importantly, with the input of Missourians to look at what that looks like. But, you know, definitely we have to modernize our tax code again. It's over 100 years old. The states around us have done it multiple times to bring it up to speed in the e-commerce society that we live in. [00:14:08] Speaker 1: I know when you talk with us back in October of 24 when you were running for governor back then and mentioned that there would be no increased taxes. None. You said period. Have you violated that campaign promise then at that point or have you changed your mind about whether or not there would be tax increases? [00:14:21] Speaker 2: No. There's no scenario where this plan doesn't become a net increase to the average Missourian. Every model you look at, no matter if they widen the tax, they ratchet it up a point or two, no matter what they do. The average Missourian watching this show, the average family is about $2,000 net into their pocket and it goes up and down from there. So at the end of the day, if Missourians actually get to keep more of their money, and in this case it's $9 billion a year to Missourians, I think that's a benefit to Missourians. [00:14:50] Speaker 1: And again, for those who argue that maybe low income people or seniors might be harmed, what would you say to that? [00:14:55] Speaker 2: Well, we've taken out the things that they pay the most on. So it could be rent. That won't be part of it because we said we're not going to tax anything that does real estate. We're not going to tax health care. There's prescriptions. That's a big piece. We already don't have state sales tax on most food items. That's a huge piece. We've looked at that. My mother was a working single person that raised six kids by herself. If I looked at my mother's income tax return, this would not affect her in a negative way. So I'm very sensitive to the seniors and low income, and I believe that this will still be a good deal for them. [00:15:25] Speaker 1: If the legislature does any of those things, again, the final vote is yours with veto power? [00:15:30] Speaker 2: Absolutely. [00:15:31] Speaker 1: Would you be willing to veto any bill that came forward that you didn't agree with? [00:15:34] Speaker 2: Absolutely. And the legislature, I think you know, and hopefully your viewers know, that I work with our legislator very closely. It doesn't matter what part of the state they're from. It doesn't matter what party they're from. I keep a very close working relationship with our legislature. So I don't anticipate some surprise bill coming to me. We'll be very involved in the conversations as these processes move forward. [00:15:55] Speaker 1: You mentioned openness and transparency. Would you be committed to an Amendment 5 report card of some kind, just so that people can really understand what's gone down, what's gone up? [00:16:04] Speaker 2: Well, absolutely, because we know what the results are going to be. The results are going to be more money in Missourians' pockets. We think it's going to help grow our population. It's going to keep us competitive with those other states that are actually growing their population now. We've remained flat and somewhat losing population. So a report card, I'd be 100% on board for that because Missourians are going to really like what they see. [00:16:27] Speaker 1: If the amendment does fail, what would be the next step in your mind? Are there still other measures you would like to see taken? [00:16:33] Speaker 2: We're working on passing the amendment right now. So that's our focus is to get this done. Look, we've already taken action on taxes. We had one of the largest tax cuts in my first term that we've ever had with eliminating state income tax on capital gains really helped our family farms and those generational farmers that are trying to pass land down to their children for generations. So we're very sensitive to what tax policy looks like, and we're going to continue to make sure Missourians always try to get to keep more of their money whenever possible. [00:17:00] Speaker 1: For a maybe cautious middle-of-the-road voter who's not sure which way they're going to go, what would your final thoughts be for them? [00:17:06] Speaker 2: Well, I would look at your own budget and see what you think. Again, an average household that would spend two to 20 or save two to $2,500 in their pocket, what that looks like for their budget. And I would look at that and say, what could you do with that money? What extra monthly payment could you make? What vacation could you take? What could you do with that? I think Missourians will really reflect on what that income is available for and how it can help their family. [00:17:33] Speaker 1: Thank you for your time. We appreciate it. [00:17:35] Speaker 2: You bet. Thanks for coming down.