Tom Eblen: Bourbon industry fighting back on new tax

Bill Samuels' speech to the Bluegrass Hospitality Association was a lot like the Maker's Mark bourbon his company produces: smooth with a distinct flavor — and a kick.

Samuels talked Wednesday about how Kentucky has a monopoly on making premium bourbon. How it is a growing industry, which has doubled production since 1999. How it directly employs 3,200 people, has made $100 million in capital investment and creates $3 billion in gross state product.

Then he talked about how bourbon is creating a spinoff tourism and hospitality industry with huge growth potential that could rival Scotland's whisky trail and California's wine country.

Samuels unveiled a new logo and souvenir passport for the Kentucky Bourbon Trail, a 10-year-old marketing effort that has brought millions of tourists to the eight participating distilleries.

Then he delivered the kick.

Samuels blasted state officials, accusing them of trying to kill the bourbon industry with excessive taxes and unfair sales restrictions. And he signaled that the industry will be fighting back.

"We're not looking for subsidies from our commonwealth," Samuels said. "But we're sure as hell not looking to be thrown under the bus."

The bourbon industry is smarting over the General Assembly's eleventh-hour move earlier this year to balance the state budget by adding the 6 percent sales tax to alcohol.

On Kentucky Derby weekend, a group of industry players ran full-page newspaper ads in Lexington and Louisville demanding that the governor and legislature reconsider.

"Kentuckians already pay the second-highest taxes on beverage alcohol in the U.S. We say enough is enough," the ad said. "If you see the governor or one of our legislators during the Derby Season, let them know what you think of their unfair tax policies because it's time to restore common sense to the Commonwealth."

The Kentucky Distillers' Association is working on developing a legislative strategy, president Eric Gregory said. He said the industry wants to make sure it has "a seat at the table" when lawmakers discuss much-needed tax reform.

"There are now seven different taxes on bourbon," Gregory said. "That's insane."

Why is liquor so heavily taxed? Because it's an easy political mark, especially in a state where many Christian denominations consider drinking a sin. Forty-nine of Kentucky's 120 counties ban alcohol sales, and an additional 41 counties restrict them. A big reason for that is church folks and their legislators.

"I travel all over the world, and the only place I have ever heard the signature product, the signature industry, referred to as sin is in Kentucky," Samuels said.

"If the majority of our elected officials believe that what we're producing is sin, we need to confront it. And if they win, we need to shut all this stuff down because we wouldn't want to embarrass them. I would contend that's an issue that needs to be dealt with. We've got to call their hand on it. We're going to force that issue."

Last year, Rep. Steve Riggs, a Louisville Democrat, suggested that only "wet" counties should receive the benefits of future alcohol taxes. In a General Assembly dominated by legislators from those mostly rural "dry" counties, the idea went nowhere.

Samuels suggested legislation removing all local-option restrictions and forcing counties that want to ban alcohol sales to vote "dry" again. And, he said, those that did should not get any alcohol tax revenues.

"It was estimated that to do that would have raised twice as much money as adding the tax, which took our product, of this signature industry, to the second-highest in the country," he said.

State tax receipts on distilled spirits dropped by more than half last month as the new tax took effect. But it's too early to know whether that was because of the tax, the overall economy or simply because people stocked up before the new tax went into effect.

Samuels had two points to make to the tourism people. One was that the bourbon industry is a major, growing contributor to Kentucky's economy. The second was that bourbon-related tourism and hospitality has huge growth potential.

"This is the cheapest economic investment that the state could make," he said of lowering taxes on the bourbon industry. "In my judgment, (bourbon-related tourism) has every bit the potential for being for Central Kentucky what Napa and Sonoma are for California. But if the industry itself is not viable, it has no chance."

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