A new Kentucky task force is studying taxes placed on bourbon barrel sales in the state and seeking ways to increase tax revenue and new jobs by developing an ideal tax rate structure.
Bourbon is a booming $9 billion economic and tourism engine for Kentucky, sustaining more than 22,500 jobs with an annual payroll topping $1.23 billion each year. Bourbon generates more than $285 million in local and state taxes and $1.8 billion in federal alcohol taxes, according to the Kentucky Distillers’ Association (KDA) biennial economic impact report.
Kentucky is the only place in the world that taxes each aging barrel of spirits. Currently, there are 10.3 million aging barrels of bourbon in the commonwealth. Distillers filled more than 2.4 million barrels in 2020 alone, the third year in a row that production topped the two million mark, the KDA said.
The Bourbon Barrel Taxation Task Force, chaired by Kentucky Senate President Robert Stivers, R-Manchester, will look for ways to help the industry grow without pulling money away from other local taxing bodies, Stivers said. Eliminating the barrel tax is one approach the task force is studying.
“The bourbon industry has boomed since taking root in Kentucky in another century,” Stivers said. “It’s time to take a closer look at how our signature industry is developing on a local, national and international scale and see if we can adjust the tax structure associated with a far more refined process than over 200 years ago.”
At its July 22 meeting, the task force heard a state of the bourbon industry report from KDA and heard estimates on potential lost revenue.
“It is critical that distillers, partners and elected officials continue to work together to eliminate artificial and unnecessary barriers to growth. Doing so will attract more distillers and investments to the commonwealth. Our economic future is in our hands,” said KDA President Eric Gregory.
Distilling has the highest job spin-off factor among the top 20 Kentucky manufacturers by employees; for every distilling job, three more are created.
“It’s clearer than ever that Bourbon is a great investment for the future of Kentucky,” Kentucky Chamber President and CEO Ashli Watts said earlier this year when KDA released its economic impact report.
Tax reform has been one of the state chamber’s priorities, and Watts said that includes relief from the barrel tax.
“With so many beneficiaries of bourbon’s success, why would we keep barrel taxes in place and leave additional growth on the table?” Watts said. “One sure way to encourage job creation and investment is to eliminate the burdensome barrel tax that shackles distilling’s growth.”
The task force will meet again on Aug. 26 at the capitol to prepare to possibly craft a bill lowering taxes on the bourbon industry during the 2023 legislative session, reported Spectrum News.
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