If you’ve had the pleasure of taking a drive around the Kentucky countryside over the last few years you’ve no doubt seen the cranes dot the landscape. Not the kind of cranes that fly south for the winter, but the kind of cranes used to build the warehouses that now hold millions of 53 gallon barrels of aging bourbon whiskey.
The Kentucky Distillers’ Association (KDA) is reporting that for the first time in the modern era of American whiskey, Kentucky has more than 10 million barrels of Bourbon aging in warehouses across the state.
Kentucky’s legendary distilling industry also set new production records for the number of Bourbon barrels filled in a single year – nearly 2.5 million – and for the total number of all aging barrels including other spirits such as brandy, at nearly 11 million.
Question of the Day
Q: What is the official state beverage of Kentucky.
2.084 State drink – Milk is named and designated as the official state drink of Kentucky.
History: Created 2005 Ky. Acts ch. 36, sec. 1, effective June 20, 2005.
The new production numbers are based on inventories reported as of Jan. 1, 2021, submitted to the Kentucky Department of Revenue for tax purposes and includes all distilling companies in Kentucky, the vast majority of which are KDA member distilleries.
How Many Barrels of Spirits are Aging in Kentucky?
- Total barrels of Bourbon: 10,321,793
- Total inventory including Bourbon and other spirits: 10,880,328
How Many Barrels of Bourbon Were Filled in Kentucky in 2020?
- Number of Bourbon barrels filled in 2020: 2,437,603
The previous records for all three categories were set in calendar year 2019 and reported on Jan. 1, 2020.
The Kentucky Bourbon revolution has seen tremendous growth since the turn of the century. Production has skyrocketed 436% since 1999. The state’s aging Bourbon inventory has increased 200% during that time while the total number of all barrels has nearly tripled.
“This is truly a historic and landmark record,” said Kentucky Distillers’ Association President Eric Gregory. “Kentucky’s signature Bourbon industry continues to invest in our Commonwealth at unprecedented levels, despite global pandemic disruptions, exorbitant taxes and ongoing trade wars.”
Kentucky Distillers Paying $33 Million in Annual Barrel Aging Taxes
Barrel taxes have catapulted 140% in the last 10 years alone, Gregory said.
Kentucky distillers will pay a record $33 million in aging barrel taxes in 2021. Kentucky remains the only place in the world that taxes aging barrels of spirits as part of the production process, a discriminatory tax that hampers growth and jeopardizes the state’s ability to attract new distillers.
“The Bourbon industry is investing more than $5 billion in this state to increase production, build innovative tourism centers and create thousands of new jobs,” he said. “But punitive barrel taxes are punishing this growth and harming our chances to land new distilleries.
“It’s time for the legislature to take action and make barrel taxes refundable or transferable, which will further incentivize distilling investment in the Commonwealth. Kentucky should not have a tax structure that penalizes growth and investment on any manufacturer.”
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Even though the Kentucky legislature passed a corporate income tax credit in 2014 to offset barrel taxes, the escalating number of barrels – and therefore taxes – far outpaces the amount of credit that distillers can take, Gregory said. Some distillers now only realize 30% of the credit.
The tax-assessed value of all aging barrels is now $4.4 billion, the first time it has surpassed the $4 billion mark and a staggering $589 million increase over the previous year.
Distilling remains the highest taxed industry in the state, paying more than $300 million every year in state and local taxes. Meanwhile, an upcoming economic impact study will show that Kentucky leads the nation in federal excise taxes on alcohol, paying $1.8 billion each year with almost all coming from distillers.
This means that Kentucky distillers pay about $2 billion each and every year to the government in taxes.
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 $5.1 billion capital investment campaign to satisfy the global thirst for Kentucky Bourbon.