Pat Nolan Blog

A taxing shoot in the foot

At just under 2.5 million, a record-breaking number of Bourbon barrels were filled this year in Kentucky. This puts the total number of Bourbon barrels ageing in various rickhouses across the US state at 10 million.

 

The Kentucky State tax law regards aging barrels of Bourbon as "property" and as such subject to property tax. “Every year that a barrel ages, it's taxed again and again and again.”

The Kentucky State tax law regards aging barrels of Bourbon as “property” and as such subject to property tax. “Every year that a barrel ages, it’s taxed again and again and again.”

But Bourbon-producers are not as happy about this as they might be.

A freak Kentucky property law sees each barrel slapped with a sizeable tax for each and every year it’s stored.

Their successful year means that the Bourbon distillers must now fork out more than $33 million in ‘aging barrel taxes’ for 2021.

The Kentucky State tax law responsible for this regards aging barrels of Bourbon as “property” and as such subject to property tax.

“Every year that a barrel ages, it’s taxed again and again and again,” the President of the Kentucky Distillers Association Eric Gregory explained to CNBC, “If you’re drinking a bottle of 18-year-old Elijah Craig, that whiskey from that barrel had been taxed 18 times before it was even bottled.”

Part of an industry worth $8.6 billion, the Kentucky Distillers Association puts the total annual economic impact of the distilling industry there at 20,100 jobs, with an annual payroll of $1 billion in producing $8.6 billion-worth of economic output.

This additional ‘tax’ on a spirt is believed to be the only one in the world and as such, must be considered counter-productive – especially as this tax has risen by 140% over the last decade.

Kentucky is represented by top Republican Senator Mitch McConnell.

Since no other country can produce Bourbon, it seems like a shot of Bourbon has struck an export foot.

As if the American spirits industry hadn’t enough to contend with what with Covid-19 and then the EU tariffs from the US spirits-makers’ largest international market etc etc.

Or as Eric put it: “Our industry is collateral damage”.

 

 

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