Michigan’s Proposed 24% Marijuana Wholesale Tax Faces Backlash

News Summary

The proposed 24% wholesale tax on marijuana in Michigan has drawn criticism from advocates and industry stakeholders, fearing it will hurt the struggling cannabis market. While the tax aims to generate funding for road repairs, operators warn it could lead to higher prices and push consumers to illicit markets, exacerbating existing challenges. This potential tax increase positions Michigan to have the second highest marijuana tax rate in the U.S., raising concerns about the sustainability of small cannabis businesses amid a decline in prices.

Lansing, Michigan — The proposed 24% wholesale tax on marijuana has sparked significant backlash from advocates and stakeholders within Michigan’s cannabis industry, who argue that the tax could further exacerbate existing challenges faced by operators amid declining flower prices. The Michigan House passed budget-related bills on September 25 that include a road funding measure incorporating this tax.

This new tax is projected to generate approximately $420 million annually for a Neighborhood Road Fund, designed to cover necessary road repair costs. Michigan’s broader state plan reflects a commitment to providing about $1.5 billion a year for local road maintenance and improvements. However, critics are expressing concerns over the implications of the proposed tax on the cannabis market.

Operators within the cannabis sector have raised alarms that the implementation of a 24% wholesale tax will lead to increased prices of cannabis products, pushing consumers back to illicit markets. This shift could result in business closures and significant job losses in an industry already seeing a contraction in prices. In fact, the average retail price of marijuana in Michigan has dropped to $61.79 per ounce in August 2023, compared to $80.14 a year prior—marking a 24% price decline within the industry.

Should the tax pass, it would position Michigan as having the second highest marijuana tax rate in the United States, only behind Washington state’s 37% tax. Unlike existing regulations, which impose a 10% excise tax and a 6% sales tax on cannabis, the proposed wholesale tax would specifically apply to marijuana sold or transferred to retailers. The tax was negotiated down from an initial 32% proposed by Governor Gretchen Whitmer as part of her budget to alleviate pressures on the state’s infrastructure.

For the proposal to become law, it must be approved by the Senate and signed by Governor Whitmer before the October 1 deadline to prevent a government shutdown. The lack of unanimous support for the tax reflects ongoing tension within the budget negotiations, even though the House managed to pass the tax bill with bipartisan support.

Industry representatives are mobilizing against the tax, with plans for protests at the state Capitol, indicating a growing dissent against the proposed legislative change. There is also a legal debate surrounding the requirement for a supermajority vote for the tax’s implementation, stemming from the original marijuana laws established via a voter ballot initiative.

Experts within the industry have noted that larger corporate operations may be positioned to absorb the financial impact of the new tax; however, smaller businesses are already struggling to maintain profitability amidst market challenges. This scenario raises substantial worries regarding the sustainability of smaller cannabis enterprises in the face of rising costs.

If passed, the tax could take effect on January 1, leading many to question whether consumers will seek out cheaper illicit options instead of legal routes. The consequences of a wholesale tax on an already declining industry raise pertinent questions about the long-term viability of the legal cannabis market in Michigan.

As scrutiny mounts, stakeholders in the industry are contemplating legal challenges should the tax legislation pass, citing potential violations of previously established legal processes tied to the original legalization of marijuana in the state.

With the state’s attention divided among pressing issues, Senate Majority Leader Winnie Brinks highlighted that the budget also encompasses key areas such as education and healthcare, illustrating the multifaceted nature of the current budgeting process and the priorities at play.

Deeper Dive: News & Info About This Topic

• Bridge Michigan: Pot for Potholes
• Detroit Free Press: Cannabis Industry Alarm
• WZZM13: Dispencary CEO Fights Tax Hike
• Crain’s Detroit: 24% Wholesale Tax
• MLive: Michigan’s Tax Rate
• Wikipedia: Cannabis in Michigan
• Google Search: Michigan Marijuana Tax Proposed 2025
• Google Scholar: Michigan Marijuana Tax Impact
• Encyclopedia Britannica: Marijuana
• Google News: Michigan Cannabis Taxes