Kentucky Sets New Record for Aging Whiskey Barrels. But It’s Not All Good in The Bourbon State.

I can vividly remember back in 2010, Kentucky Governor Steve Beshear touting there were over 4,000,000 barrels of aging whiskey in Kentucky, essentially one for every person in the state. Now, more than a decade later and under Governor Andy Beshear (former Gov’s son), that number was reported by the KY Distillers Association (KDA) to be at a towering 12.6 million barrels of aging whiskey, 3 to 1 barrel to person ratio in Kentucky. This is a new record for barrel inventory in Kentucky.

Sounds like good news. And it is, for the most part. Certainly better than the alternative as the Bourbon Industry faced a decades long drought of decline from the 70’s to 2000. And the growth of growing barrel inventory has been consistent, setting records year after year after year.

New barrel production clocked in at 2.7 million as 2m has been topped annually for five consecutive years. Total yearly barrel production (brandy, vodka, et) hit 13.3 million, a record in itself. In 2022, the KDA reported that whiskey production has shot up 475% since 1999.

In short, the industry is rolling. With robust production comes an increase in all associated materials needed to make the whiskey, to store the whiskey, and labor put forth to make both the whiskey and the barrels.

Barrel Taxation Hits New Record

The flipside to the coin, the KDA reported another record that the industry is not too thrilled about. Dishing out $50.2 million in barrel related taxation. This is also a record of a reported 30% increase in paid taxes from the prior year which approached $40 million. The year prior to that, taxation was closer to $30 million.

With steep inflation related to COGS (barrel materials, grain, labor, et et), barrel taxation has increased 122% in the last five years. Since 2010, those taxes have risen 316%. The total assessed barrel valuation hit a staggering $6.7 billion, up from the prior year’s mark of $5.2 billion.

Kentucky is the ONLY state in all of America that imposes a yearly property value related tax on all spirit barrel inventory. As a result, it got hot here in the Bourbon State between government and industry, hotter than the top floor of a 100 story rickhouse in August. Better put, it finally came to a boil.

As a result, Kentucky Governor Andy Beshear approved House Bill 5 which essentially outlines a 20 year period which ends with the halting altogether of annual barrel taxation in Kentucky. It is progressive in structure, meaning the yearly percentage tax decline increases over time. Funding for local community schools, EMS, fire departments and appropriate municipal related areas are reported to still receive Bourbon Industry funding.

Leading up to House Bill 5, the thought of eliminating yearly barrel taxation to local communities was unnerving to put it lightly. Injunctions were filed to stop new production of barrel warehousing. Yes, that happened. One official said it felt like “a divorce” had happened between their community and the industry. However, mends were made as it seems like peace time has returned to Bourbon Country.

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