Michigan roads tax plan may drive cannabis shops out of business.

The Plan

Michigan’s cannabis industry is raising concerns about Governor Gretchen Whitmer’s proposal to raise $470 million per year for roads by implementing a 32% wholesale tax on marijuana. The governor recently introduced the $3 billion “Mi Road Ahead” plan, which she described as “fiscally responsible and balanced.” She highlighted that Michigan’s marijuana tax is one of the lowest in the nation and has contributed to the growth of marijuana retailers.

Impact of Tax Increase

The proposed tax increase would be in addition to the 10% excise tax on recreational marijuana and the state’s 6% sales tax. This wholesale tax would directly affect growers, leading to increased costs for retailers and consumers. Governor Whitmer stated that the plan aims to close a loophole that exempted the marijuana industry from wholesale tax, similar to taxes on cigarettes and other tobacco products.

Industry Concerns

Retailers in the marijuana industry are expressing their worries about the potential tax hike. Al Williams, president of a dispensary in Detroit, emphasized that the industry is already facing challenges and that a 32% tax increase would be unreasonable. Williams, who is also running for chair of the Michigan Democratic Party, believes that such an increase could drive more people to operate in the black market.

Current State of the Industry

Michigan currently has 850 retailers, nearly double the number from 2021. With an increase in supply, prices have dropped significantly. In 2023, the excise tax on marijuana generated over $270 million in revenue for the state. Tax revenue from recreational marijuana sales is allocated to schools, roads, and local governments. On average, Michigan sells about $265 million worth of marijuana per month.

Consumer Impact

The tax increase would ultimately be passed on to consumers. For example, a vape pen that costs $20 could increase to $27 or more. Some experts warn that businesses may struggle to survive with this additional financial burden, potentially leading to price hikes or a reduction in supply. In conclusion, the proposed tax increase on marijuana in Michigan has sparked concerns within the cannabis industry. Stakeholders are urging Governor Whitmer to consider alternative solutions to fund road improvements without imposing such a significant tax hike on the industry.