Bourbon is Booming, but Kentucky’s Industry Faces Major Challenges: KDA

Bourbon continues to boom in Kentucky. The Kentucky Distillers Association announced today that barrel inventory for 2020 is near 10 million, breaking several state records.

The total number of barrels of bourbon currently aging in the state is 9,266,228, with nearly another 600,000 other spirits currently in barrels. More than 2 million barrels were filled last year alone.

The previous high for total barrels was 9.1 million last year, according to the KDA announcement. Before that, the record was 8.7 million back in 1968.

This year also marks the first time since 1967, when the KDA began keeping such records, that the number of aging bourbon barrels topped 9 million. It also marks the second straight year Kentucky distillers have filled more than 2 million barrels. This is a modern-era first.

For perspective, KDA says, the number of total barrels in Kentucky has increased 164% since the turn of the 21st century.

Numbers are based on warehouse inventories as of Jan. 1 as submitted to the Kentucky Department of Revenue for tax purposes. The numbers reflect all distillers, not just KDA members, the announcement says.

Bourbon is an $8.6 billion economic driver 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.

However, KDA President Eric Gregory warned that there are still challenges: The COVID pandemic has hampered tourism and hospitality, and retaliatory tariffs on American spirits are a big issue for distillers as well. And barrel taxes in the state are mounting, putting Kentucky distillers at a competitive disadvantage.

He said distillers are paying a record $29 million in barrel taxes in 2020 as the only place on Earth that taxes aging barrels of spirits. Tax-assessed valuation of all the aging barrels in Kentucky is now $3.8 billion, which is a $400 million increase over 2019 and twice the rate since 2010, according to Gregory. That has increased barrel taxes 138% over the past 10 years.

A 2014 corporate income tax credit designed too offset barrel taxes doesn’t match the rising number of barrels, prompting Gregory to call for relief.

“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 in a news announcement. “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.”

And while production is up, Kentucky spirits exports are down 32 percent compared to the same time last year, according to data from the state Cabinet for Economic Development. Federal trade tariffs, he said, are to blame.

“Our industry is collateral damage in trade disputes that 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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One Reply to “Bourbon is Booming, but Kentucky’s Industry Faces Major Challenges: KDA”

  1. Make it available that distilleries and liquor stores can sell to all 49 states instead of just a handful. It’s too far to drive from where I live

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