Economic Tidbits

Burden on Bourbon

The burden of property taxes in Nebraska have been thoroughly debated in this year’s Legislature. But Nebraska isn’t the only state where property taxes are a topic in the state’s legislative body. According to Fortune magazine, the impact of property taxes on the state’s bourbon idustry was the subject of legislation this year in Kentucky. Kentucky accounts for 95 percent of the world’s bourbon production according to the Kentucky Distillers’ Association. During the production process, bourbon is aged for several years in oak barrels stored in large warehouses. These barrels of aging whisky was subject to both state and local property taxes in Kentucky. The state levied a tax of 5 cents per $100 of assessed value and the local tax was based on each county’s property tax rate. The distillers’ association says the industry paid nearly $40 million in taxes last year. The total assessed value of the 12 billion barrels of aging bourbon surpassed $5 billion. 

Kentucky is the only state to levy a tax on aging barrels of whiskey. (Fact checking with a distiller in Omaha during a tasting confirmed this to be true in Nebraska.) The Kentucky bourbon industry is worried that unless something was done, growing inventories and more production in the future would lead to surging taxes. In response, producers could start locating warehouses in other states to avoid the tax. The Kentucky Legislature responded by passing legislation to phase out the property tax beginning in 2026 through 2043. 

Local government officials aren’t too pleased with the phase out of the tax, saying the elimination will cause financial burdens for them and other local property tax payers in counties where warehouses are located. Local officials also argue the industry increases costs for local governments from wear and tear on roads to use of water and sewer systems. 

While Nebraska agriculture and the bourbon industry in Kentucky wouldn’t seem to have much in common, besides a pour or two from time-to-time, their disdain for property taxes might unite them. 

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