LOUISVILLE, Ky. (WDRB) -- Kentucky lawmakers on Monday fast-tracked the bourbon industry's priority of phasing out a state tax on aging bourbon barrels, despite pleas from officials in distillery-heavy counties like Nelson and Bullitt that the loss of revenue will devastate their communities.
The bill to gradually repeal the so-called barrel tax passed the House of Representatives by a comfortable margin — 59 to 40 — though several Republicans dissented. The GOP holds 80 of the 100 seats in the body.
The bill now moves to the state Senate.
House Bill 5 would begin phasing out the barrel tax, which generates about $33 million a year in tax revenue, in 2026, with a complete removal by 2039.
House budget chairman Rep. Jason Petrie said with the growth of the industry, actual barrel tax receipts are not expected to plateau until the 2030s.
GOP House leaders separately advanced a bill to mitigate any funding losses for public schools by pledging money from the state's savings fund to ensure no school district's barrel-tax funding drops below its 2022-23 level.
But local officials said the barrel tax provides crucial funding for fire protection, roads, water and other community infrastructure necessary to support the booming industry.
"You're elected by the people. You're not elected by the distilleries," Nelson County Judge-Executive Tim Hutchins told the House budget committee Monday. His county is home to Heaven Hill and Sazerac's Barton 1792, among other distilleries.
"... I'm just telling you, we need the money to survive. Are we gonna have to cut services, sir? I mean, it's coming down to that."
Josh Ballard, a city commissioner in Maker's Mark's hometown of Loretto, said the industry's claim that the barrel tax is hampering its growth is belied by the Kentucky Distillers Association's own figures showing a huge boom in distillery investments and barrel production in recent years.
"To add insult to injury, the bourbon industry claims the barrel tax discourages growth," he said. "In the same breath, they boast about $5 billion of expansion currently underway in Kentucky. Their own data proves it does not discourage growth."
Though Kentucky is deeply ingrained in the history of bourbon, the state is not "entitled" to be the home of the industry, House Speaker David Osborne said.
"The distilleries are not going away," he said. "They're gonna continue to make their bourbon here. But this will help cement ourselves as the bourbon capital of the world. And I believe it is reasonable."
