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Bourbon Whiskey

Kentucky should not give bourbon industry everything it wants


Editorials and other Opinion content offer perspectives on issues important to our community and are independent from the work of our newsroom reporters.

The bourbon industry wants a break on the tax they pay on barrels as they age in warehouses.

The bourbon industry wants a break on the tax they pay on barrels as they age in warehouses.

2009 staff file photo


Whiskey fungus

The booming $9 billion Kentucky bourbon industry has created a boom in something else: Whiskey fungus.

Neighbors of proposed bourbon rickhouses in at least three counties — Henry, Franklin and Anderson — have been fighting plans to build warehouse campuses that they fear will inundate their homes, cars, gardens, playgrounds and property with the black mold-like growth.

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Bourbon and Kentucky have been in a prolonged honeymoon that started practically with our state’s founding when some bright soul used Kentucky’s limestone-filtered spring water in combination with some fermented corn to create a heavenly elixir. The relationship turned extra passionate over the past 20 years with bourbon’s explosive popularity across the globe, thanks to its suave and sophisticated depiction in shows like “Mad Men” and chic mixology manuals. New distilleries and warehouses proliferated across counties like Woodford, Nelson and Franklin, while others expanded to accommodate the thousands of people who wanted to see how bourbon is made in its natural habitat. It’s meant lots of jobs, lots of tax base and lots of profits for the global corporations who bought up all our local brands.

It’s only today that we seem to need just a hint of marriage counseling.

As reporter Janet Patton has laid out in a comprehensive special report, the bourbon industry has lost some of its allure, as people deal with whiskey fungus and some strong-arming to build more and more warehouses in our rural landscapes. In spite of record profits, the bourbon industry wants more and better tax breaks that the General Assembly is actually considering, in spite of the danger to local tax bases. The industry has become demanding and petulant and less of a loving supportive partner in this relationship.

Bourbon is not going away, despite the distillers’ threats that they will move to other states; Kentucky produces and ages 95 percent of the world’s bourbon, and while you can make bourbon elsewhere, Kentucky is an integral part of the brand. The horse industry makes the same kinds of claims about greener pastures, although they are slightly more valid because of longstanding horse industries in states like New York and Florida.

But both those industries, which are so intertwined in Kentucky’s heritage and mythology, bring up some interesting questions about how a state and a profitable industry can become and remain good, mutually beneficial partners.

One problem is that Kentucky has always kowtowed to big industry, whether it’s the behemoth of coal or a chimera like Braidy Industries, which received state funding for an aluminum plant that somehow never materialized.

“I think part of the problem is that we tend to subsidize these industries whether they’re doing well or not,” said Jason Bailey, executive director of the Kentucky Center for Economic Policy. “It doesn’t matter what the circumstances are — bourbon is extraordinarily profitable right now, so why shouldn’t our schools and public services also benefit from that when it’s clearly not an impediment to their soaring profits?”

The crux of the problem for the bourbon industry is that they can offset their barrel tax against their corporate taxes, but in 2018, Kentucky cut corporate taxes, so they aren’t getting as much back as they were before. The industry’s solution is to eliminate the barrel tax altogether, which would then devastate the tax base of the counties where they are located. As Judge Executive James Kay of Woodford County pointed out, local firefighters depend on barrel tax revenues, which helped them have enough personnel to fight a massive warehouse fire in 2019 that raged for days. With no barrel tax, he asked, “who’s going to put out the fire?”

Probably, the legislature will figure out a way to make the industry pay the barrel tax to local governments, but then give them a tax credit at the state level. That’s good for counties, but just another expensive item in our state budget’s bottom line, already set to take a huge hit from a new income tax reduction. Classic corporate welfare.

Too often in dealing with our industries, Kentucky’s leaders seem to take the position of hostage negotiators, rather than equal partners. What if instead they said to bourbon, we need you, you need us, we both know you’re not going anywhere. We both need steady growth, but we don’t need for Kentucky to suffer so you make even more profits for international stakeholders. County governments should also take a harder line and work with the industry to find the best place for warehouses together before our agricultural zones suffer too much.

Healthy relationships are based on trust and mutual understanding, not threats and subterfuge. We love Kentucky bourbon and we want it to love us back.

This story was originally published August 19, 2022 6:00 AM.

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