Officials, school superintendents, voice concerns over loss of barrel tax revenue
By JIM BROOKS
Nelson County Gazette / WBRT Radio
Monday, Feb. 27, 2023 — A bourbon barrel tax press conference called by Nelson County Judge-Executive Tim Hutchins packed the fiscal court meeting room with an overflow crowd that included elected state and local officials from several counties, school district superintendents, judge-executives, fire and emergency service representatives.
The overall sentiment of the meeting was simple — local officials and stakeholders who have historically supported the bourbon industry for decades want to work with the industry to find a compromise solution.
The issue is House Bill 5, legislation that — if approved — will eliminate the barrel tax that generates nearly $9 million in revenue that benefits local school districts, the City of Bardstown, county government and other agencies.
Pam Thomas from the Kentucky Center for Economic Policy provided the crowd with some history of the state’s bourbon industry and the barrel tax.
According to Thomas, in 2012, the legislature, responding to industry complaints about the barrel tax, gave distilleries that pay the barrel tax a tax credit that could reduce their state tax burden.
However, in 2018, tax calculation changes meant the bourbon industry could base its taxation solely on the sales of its product in Kentucky. This change effectively reduced their taxes to the point that they are unable to tax advantage now of the tax credits they receive for paying the barrel tax.
The move now by the industry’s lobbying group, the Kentucky Distiller’s Association, is to eliminate the barrel tax.
“Any cut on that tax is padding to their bottom line,” Thomas said. She added that in her analysis, the bourbon industry did not have a credible argument to claim that the barrel tax is holding back the industry’s growth.
Growth of the bourbon industry in Nelson County supports her analysis.
Bardstown Mayor Dick Heaton noted that the industry has announced $700 million in announced expansion in Nelson County over the past 12 months. The city and county have agreed to support the industry’s growth with inducements and abatements through Industrial Revenue Bonds that can’t be changed.
Heaton noted the tax amounts to $2 a barrel.
Bardstown has a very long history of being famous for bourbon distilling, he said.
“The distilleries have been great partners of ours,” he said. “I don’t see the need” to eliminate the barrel tax.
AFFECTS SCHOOLS, LAW ENFORCEMENT. Wes Bradley, superintendent of Nelson County Schools, noted that if the barrel tax goes away, it will be local tax dollars that will be used to make up the difference.
Bradley said the loss of the barrel tax revenue to the Nelson County Schools would mean an average tax increase of $150 a year to each property owner. The increase would affect all property owners in the county.
“We need to partner with the industry,” Bradley said. “We need to be at the table and be a part of these important conversations. Economic competitiveness is more than just tax breaks.”
Sheriffs from Nelson, Anderson, Marion and Shelby counties were at the meeting, all of whom said their departments will lose revenue based on tax collection fees.
Nelson County Sheriff Ramon Pineiroa said his office stands to lose as much as $250,000, which will affect his ability to keep deputies patrolling the county 24 hours a day.
Marion County Judge-Executive David Daugherty noted that only 20 counties in Kentucky have bourbon storage warehouses, and it is important to let members of the General Assembly know where we stand on House Bill 5.
“We have to be the squeaky wheels the next few days,” he said.
State Sen. Jimmy Higdon said he has long been a supporter of the bourbon industry in the 14th District, which includes half of the world’s stored bourbon.
“I’ve supported the industry, but I’m not in support of House Bill 5,” he said to applause from the audience. He said there needs to be a solution that doesn’t put it on the back of the taxpayers.
The bourbon industry is growing at a significant rate, he said, with 70 new distilleries with a $2.8 billion investment in the past year alone.
Higdon said that because this session of the legislature is a short session, any tax-related bill will require a supermajority to pass. If it doesn’t pass this session, expect similar legislation to return next year, he said, when there is no supermajority needed for approval.
The Kentucky League of Cities, the Kentucky Association of Counties, the state judge-executive’s group, state firefighter’s association and state law enforcement groups have all gone on the record in opposition to House Bill 5.
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