Kentucky counties would lose millions of dollars in revenue that funds important public services, sheriff’s offices and fire districts if a tax on distilled spirits were to be repealed. That was the message legislators in Frankfort heard Thursday at a meeting of the Bourbon Barrel Taxation Task Force.
“I think we all agree that we really love Kentucky bourbon,” said Jim Henderson, executive director of the Kentucky Association of Counties. “Counties have invested in the bourbon industry because they believe in it.”
Bourbon is a thriving $9 billion industry in Kentucky, and 40 counties are now home to a least one distillery, according to the Kentucky Distillers’ Association. Local support and investment in the industry have come in the form of industrial revenue bonds, infrastructure improvements and fire districts. In turn, distillers pay an ad valorem tax on aging spirits, also known as the bourbon barrel tax.
The tax generated around $10 million last year for county fiscal courts, cities, health departments, fire districts, libraries and other taxing districts. Millions more went to school districts.
Bullitt County Judge/Executive Jerry Summers spent 40 years working in the bourbon industry and is a member of the Kentucky Bourbon Hall of Fame. He told lawmakers that during the past decade, counties issued $2.5 billion in industrial revenue bonds to support bourbon growth in anticipation of the bourbon barrel tax as a source of revenue.
“We’re not here to hurt this industry. We have worked with them hand in hand to keep them viable, to keep them moving forward … to make it truly a signature industry,” Summers said.
He noted that Bullitt County does not have an occupational tax and receives no insurance premium tax on the self-insured distilleries.
“We gave up property taxes for 30 years, yet we expect something back in return for that investment,” Summers said.
The bourbon barrel tax does not kick in until the spirit has aged at least two years. With more new distilleries coming online and new warehouses under construction across the state, Henderson says the impact to more local budgets will be transformative. He pointed to Henry County, which sold 40 acres of its industrial park at a discounted price to support new bourbon warehouses. More than $2.5 million in new countywide revenue is expected to be generated once those projects are complete.
“Obviously the simple solution for us is, let’s don’t bother this tax,” Henderson said. “[The bourbon barrel tax] is a tax that many counties made decisions about, hopefully the industry made the decisions knowing it was there, with no expectation it wasn’t.
“It does create holes in [local] budgets if it goes away.”
Members of the Bourbon Barrel Taxation Task Force are scheduled to meet again Sept. 23.
