Actually, that's where the Bourbon name comes from, but there's no legal requirement about distilling bourbons there. You cannot call a whisky a Kentucky whisky without it being distilled in Kentucky, though.
You probably can't tell the difference between a sour mash and a sweet mash whisky these days, and I doubt you can find a sweet mash whisky anyway.
According to the local ABC pricing chart, Jack Daniels is still around $22 here. Are you sure that your taxes haven't just gone up?
I'd still suggest George Dickel as an alternative, but the price difference here is minimal. There's also Gentleman Jack, which is an ``upscale'' Jack Daniels, so it's not likely to appeal to your ``cheaper'' criterion.
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Bitt Faulk