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The ink was scarcely dry on Governor Gretchen Whitmer’s newly signed state budget before a significant legal challenge arose. The state’s marijuana industry swiftly moved to contest a new wholesale tax on recreational cannabis, a key revenue component of the budget.
Whitmer’s signing of the $80 billion budget was a culmination of prolonged negotiations and political maneuvering in Lansing. Yet, this achievement was overshadowed by the marijuana sector’s legal action, claiming the tax contravenes the Michigan Constitution.
According to the plaintiffs, the tax is unconstitutional as it lacks the required three-fourths majority vote in both legislative houses or a public vote, as mandated for amending voter-approved initiatives like the 2018 marijuana legalization law.
Two lawsuits have already been filed in the Michigan Court of Claims, asserting the new 24% wholesale tax is illegal. The suits argue there is no allowance for such a tax in the Michigan Regulation and Taxation of Marihuana Act. While a 10% excise tax already exists for consumers, an attorney involved in the case stated, “the state can’t simply add another tax on top of that.”
Stephen Crane, representing Holistic Research Group, stated, “It’s just unconstitutional because what they’re doing is going around what the public wanted, what the public mandated in the ballot initiative.” The complaint labels the new tax as a “punitive excise tax” on marijuana businesses.
The Michigan Cannabis Industry Association has also filed a suit challenging the tax. Retired constitutional lawyer Robert LaBrant discussed the issue on the It’s Just Politics podcast. He described it as “an interesting constitutional issue that deserves to be litigated.”
The state has yet to publicly present its justification for the tax’s legality, with a response due by October 28. However, Governor Whitmer expressed confidence in the tax’s legality, stating, “We are confident in the legality of the actions that were taken to write this year’s budget, as we are every single year.”
Revenue from the tax is projected to contribute $420 million to a $2 billion initiative for state and local road funding. One of the state’s potential defenses is that the tax serves primarily as a revenue source rather than a regulatory measure.
Critics worry that increased prices could push consumers toward the black market, undermining one of the legalization initiative’s goals: reducing illegal sales by offering affordable legal options. LaBrant commented, “The question is, and I think this is something for the courts to determine, will this essentially encourage the sale of marijuana for recreational purposes on the black market.”
The legal trajectory of these cases could ultimately involve the Michigan Supreme Court, with the new tax set to take effect on January 1, pending judicial intervention.
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Have questions about Michigan politics? Or, just want to let us know what you want more of (less of?) in the newsletter? We always want to hear from you! Shoot us an email at politics@michiganpublic.org!
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What we’re talking about at the dinner table
AG on NG: Michigan Attorney General Dana Nessel shared concerns about the potential deployment of National Guard troops to Michigan by President Donald Trump. “Nessel, a Democrat, said her staff is already working, as best they can, on possible legal filings if soldiers get sent here,” reports Colin Jackson reports. This comes amid ongoing discussions about federal intervention in Detroit, as highlighted by Vice President JD Vance’s recent comments.
The “damn” swearing: Governor Whitmer has fulfilled her promise to “fix the damn roads” with the new budget. Initially controversial for her choice of words, the phrase has since become a symbol of her commitment to infrastructure improvements. The Atlantic examines the trend of political figures using strong language in public discourse in a recent article Politicians Aren’t Cool Enough to Curse This Much.
Join us!: As legal questions swirl around the new marijuana tax and a significant election looms, the It’s Just Politics Issues & Ale event in Grand Rapids offers an opportunity for discussion. Join Chad Livengood and Lauren Gibbons on October 15th to explore these topics further. Registration is free, and you can attend in person or online.
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Yours in political nerdiness,
Rick Pluta & Zoe Clark
Co-hosts, It’s Just Politics
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IJP ON THE ROAD:
Rick appeared this week on Michigan Public Television’s “Off The Record,” where he and others discussed the new state budget and marijuana tax. Republican State Representative Bryan Posthumus advocated for an interstate compact to limit cash incentives for businesses.
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