The Kentucky Distillers’ Association just announced that it has some good news and bad news for the bourbon industry—Kentucky now has more bourbon barrels aging than ever, but the industry is also paying the highest taxes in its history. But hey, something’s gotta pay for the roads that lead tourists to distilleries’ visitor centers.
In January, there were a record 11.4 million bourbon barrels silently maturing in Kentucky’s rickhouses, and there have been four years in a row of more than two million barrels filled. In total, there are nearly 12 million barrels aging in Kentucky (including other spirits), a staggering number but one that is in line with America’s, and the world’s, continued thirst for bourbon. Yes, there has been recent news about agave spirits outpacing American whiskey sales in the coming years, and that is of concern to the industry, but that doesn’t mean that bourbon consumption is slowing down anytime soon.
Of course, this also means that the bourbon industry is paying high taxes, with the tax-assessed value of the barrels hitting $5.2 billion this year, according to the KDA. “We’re thrilled that our homegrown and historic industry continues to flourish, but these numbers could have been much higher if Kentucky didn’t have a major barrier to entry for new distilleries in the form of this barrel tax,” said KDA president Eric Gregory in a statement. What he’s referring to is the fact that Kentucky, the ancestral home of bourbon (which can be made anywhere in the US), is now number 12 in the country as far as number of “distilling operations.” What the KDA attributes this to is the state’s policy of taxing aging spirits, which means it can be harder for new distilleries to afford to make whiskey there. According to the KDA, there are more than 2,300 distilleries in the US now, but only 100 in Kentucky, or just 6 percent.
“We are only asking to be treated like every other manufacturer in Kentucky–and possibly the world–whose goods are not taxed during the production process,” Gregory said. “Barrel taxes hamper growth, punish success and jeopardize the state’s ability to attract new distillers in the birthplace of bourbon.” Of course, the industry is also a moneymaking behemoth, providing 22,500 jobs in the state, infusing the economy with $9 billion annually, investing tens of millions into local farms, and continuing to attract tourists from around the world.
But, like any major industry, paying high taxes (almost $300 million to the state and almost $2 billion to the government) is not desirable. “It’s critical that distillers, community partners and elected officials work together to attract more distillers and investment to the Commonwealth, because there will come a day–hopefully not in our lifetimes–when bourbon is not as popular as it is right now,” said Gregory. Even if that would mean affordable bottles of Pappy, let’s hope that day never comes.
