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State's bourbon industry sets record, but needs tariff help - ABC 36 News - WTVQ

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Kentucky Bourbon Trail
Kentucky Bourbon Trail

LEXINGTON, Ky. (WTVQ) – Kentucky is filling up with bourbon, literally.

And it’s a good thing for business.

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Kentucky bourbon continues to fuel the Commonwealth’s economy with nearly 10 million barrels of bourbon and other distilled spirits aging in warehouses across the state, the Kentucky Distillers’ Association announced.

The barrel inventory for 2020 broke several state records, the KDA said, including:
• Total barrels of Bourbon and other spirits: 9,864,197
• Total barrels of just Bourbon: 9,266,228
• Number of barrels of Bourbon filled last year: 2,122,954.

The previous high of total barrels was 9.1 million last year. Before that, it was 8.7 million in 1968.

This is the first time since 1967 – when the KDA started keeping records of barrel inventories – that the number of just aging Bourbon barrels topped nine million. It also marks the second year in a row that Kentucky distillers have filled two million barrels, the first time that’s happened in the modern era.

From a historical perspective, the number of total barrels has increased 164% since the turn of the century.

Gov. Andy Beshear said, “To the world, Kentucky’s iconic Bourbon and spirits industry is renowned and loved for its delicious, high-quality products. To Kentucky, the industry represents our history and future, with thousands of Kentuckians employed at distilleries and adjacent businesses.

“We are committed to strengthening our historic distilling industry, knowing it is not just our heritage but a main economic driver as we build a better Kentucky that works for all our citizens.”

The  numbers are based on warehouse inventories reported as of Jan. 1, 2020, submitted to the Kentucky Department of Revenue for tax purposes from 42 distillers, rectifiers and other companies licensed to store barrels.

These figures include all of those companies, the vast majority of which are KDA member distilleries.

KDA President Eric Gregory said the landmark milestones demonstrate the resiliency of Kentucky’s signature distilling industry and fortifies the state’s rightful status as the one, true and authentic home for Bourbon.

“These highpoints are important for Kentucky’s economy because it translates into more jobs and investment by our signature industry,” he said. “We applaud the support of Governor Beshear, legislative leadership and lawmakers on both sides of the aisle that have helped our industry grow and flourish.”

Still, Gregory said the industry and its partners face significant challenges both home and abroad.

The COVID pandemic has decimated tourism and hospitality, shuttering many bars and restaurants and diminishing sales. Retaliatory tariffs on American spirits are a dominant issue in the global marketplace.

Mounting barrel taxes in Kentucky put the industry at a competitive disadvantage with other states.

Distillers are paying a record $29 million in barrel taxes this year, Gregory said. Kentucky remains the only place in the world that taxes aging barrels of spirits, a discriminatory tax that hampers distilling growth, investment and jobs.

The tax-assessed value of all aging barrels is now $3.8 billion, a $400 million increase over last year and double the rate since 2010. Barrel taxes, meanwhile, have vaulted 138% in the last 10 years alone, according to the Department of Revenue.

Even though the Kentucky legislature passed a corporate income tax credit in 2014 to offset barrel taxes, the skyrocketing number of barrels – and therefore taxes – far outpaces the amount of credit that distillers can take, Gregory said.

“We again call on the General Assembly to make the barrel tax credit refundable or help our homegrown industry find ways to eliminate this unfair tax,” he said. “Kentucky should not have a tax structure that penalizes growth and investment on any manufacturer. It’s past time for barrel taxes to go completely.”

Bourbon is one of the Commonwealth’s most historic and treasured industries, an $8.6 billion economic engine that generates more than 20,100 jobs with an annual payroll topping $1 billion. Distillers also are in the middle of a $2.3 billion capital investment campaign to satisfy the global thirst for Kentucky Bourbon.

But retaliatory tariffs and never-ending trade wars continue to pose serious threats to global exports of Kentucky Bourbon, Gregory said. Kentucky spirits exports are down 32 percent compared to the same time last year, according to data from the state Cabinet for Economic Development.

“Our industry is collateral damage in trade disputes have nothing to do with Bourbon,” he said. “While today’s barrel record is great news, the long-term impact of tariffs will jeopardize our industry, our partners and our farm families. It’s been two years. World leaders need to solve these disputes now.”

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