Whether you enjoy a glass occasionally or have sworn off brown liquor since college, there is no denying that bourbon distilling has once again become a big business for the state of Kentucky. Horses and coal put the state on the map, but bourbon is what is drawing the largest crowds, leading distillers to undergo capital improvements of over $2.3 billion collectively along the bourbon trail.
Distilleries in Kentucky employ just over 20,000 people with annual payroll of close to $1 billion. Recent estimates show 9.2 million barrels of bourbon currently aging in rickhouses, a little over two barrels per Kentuckian, generating property tax revenues of approximately $29 million annually. While this is good news for the State’s finances, it is causing issues for distilleries big and small. Kentucky is the only state with a barrelage tax, which may ultimately be accountable for the sudden growth of distilleries outside of Kentucky. In 2014, the Kentucky legislature passed a corporate income tax credit to help offset the taxation, however, the rapid increase in aging barrels has greatly reduced the benefit of the tax credit. The value of aging barrels was around $3.8 billion in 2020, an increase of $400 million since 2019 and twice the assessed value of barrels in 2010.
Booms and busts
Prior to 2019, the previous peak of barrels in rickhouses was in 1968 when the state had 8.7 million barrels aging. Bourbon started losing its luster in the 1970s and was out of favor through the 1980s when rum and vodka took over the top spots nationally. During that time, much of the bourbon produced in Kentucky was exported overseas. However, prominent bourbon distillers saw an opening for another domestic bourbon boom in the late 1990s, when the Beverage Testing Institute in Chicago obtained a bottle of Pappy Van Winkle in 1997 and gave it a score of 99 out of 100 – the highest rating ever given to a whiskey. Anticipating the resurgence of bourbon enthusiasts, the Kentucky Distillers Association started the Bourbon Trail in 1999 with ten distillers. Today there are 38 distilleries only 20 minutes from each other, and the total barrelage has increased 164% since 2000. Read more “Bourbon Boom Creates Revenue for Kentucky”