LOUISVILLE, Ky. – The number of barrels of bourbon in the Bluegrass State reached a record number this year, the Kentucky Distillers Association reported.
In January, a record 11.4 million barrels of bourbon were maturing in Kentucky rickhouses – the largest amount in the industry’s 200-year history. In total, nearly 12 million barrels of alcoholic beverages are 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,” the KDA reported.
The association is pressing for elimination of the state’s barrel tax as another alcoholic beverage that is taxed less gains in popularity.
Kentucky is the only place in the world that taxes aging barrels of spirits, the KDA has complained. The skyrocketing impact of aging barrel taxes is a cause for concern, said Eric Gregory, president of the nonprofit 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,” Gregory said.
The state’s signature industry marked its fourth consecutive year of filling more than 2 million barrels of bourbon – while paying $40 million in barrel taxes, the highest amount in history.
Kentucky’s tax rate is $8.41 a bottle, while California, which leads the country in the number of distilleries, charges $3.30. Kentucky distillers pay more than $285 million in local and state taxes each year, plus more than $1.8 billion in federal alcohol taxes.
“Any distiller that wants to locate in Kentucky, they are automatically going to be paying overhead and taxes on a product that is not going to be ready to go for six, seven, eight, nine years,” Gregory said.
The bourbon industry is a moneymaking behemoth, supporting 22,500 jobs in the state, infusing the economy with $9 billion annually, investing tens of millions of dollars into local farms and continuing to attract tourists from around the world.
Kentucky distillers buy approximately 17 million bushels of corn and other grains every year, mostly from Kentucky farm families, and are investing in new stills, warehouses and bottling lines, the KDA reported.]
Kentucky, the ancestral home of bourbon (which can be made anywhere in the U.S.), is now 12th in the country in the number of distilling operations, federal Tax & Trade Bureau statistics reflect. According to the KDA, the U.S. has more than 2,300 distilleries, but only 100 of them are located in Kentucky.
The KDA said it’s been working with lawmakers to lower or remove the taxes, but that could come at a cost for other industries.
“We’ve been working with a legislative task force to try to figure out ways to eliminate that tax, or offset that tax, while minimizing any impact to local, education and community programs,” Gregory said.
Meanwhile, bourbon distillers are watching the growing competition from tequila.
Recent data by Nielsen IQ showed that tequila sales have grown 70% since last year, and agave spirits are now challenging whiskey and vodka in sales.
IWSR Drinks Market Analysis said this year, for the first time ever, Americans will spend more money on mezcal and tequila than on U.S.-made whiskey.