Michigan’s marijuana industry faces a potential turning point with Governor Gretchen Whitmer’s proposal to introduce a 32% wholesale tax as part of the broader MI Road Ahead plan. While the initiative aims to generate $470 million, stakeholders express concerns that it might drive businesses into financial distress.
Currently, Michigan’s marijuana sales are subject to a 10% excise tax and a 6% sales tax. Whitmer’s plan would add a new layer of taxation. According to a statement from her office, “After voters legalized marijuana, the industry has grown exponentially, thanks in part to Michigan’s industry-friendly taxes, the fourth-lowest in the nation.” The statement also highlights the industry’s extensive use of Michigan’s roads during transport operations.
The state’s low tax rates were initially designed to encourage consumers to purchase legally, as opposed to turning to the black market. However, Dustin Walsh, a business reporter for Crain’s Detroit, has pointed out potential risks of the new tax, suggesting it could push struggling growers toward illegal activities. “You’re now going to create more desperate operators,” Walsh commented, suggesting that increased financial pressure might lead some to resort to illicit sales.
Market dynamics have already contributed to a significant drop in marijuana prices, with costs decreasing by nearly 30% in the past year—from over $90 to about $65 per ounce. This tax proposal could lead to further price hikes for consumers. Despite these challenges, the state managed to distribute nearly $100 million in marijuana tax revenue in 2024, drawn from over $331 million in receipts.
Michael Ward, CEO of Harbor Farmz, voiced skepticism regarding the revenue expectations tied to the new tax. “It will be completely unsustainable,” Ward warned, predicting a potential decline in overall industry revenue if the tax is implemented. He emphasized that the cannabis industry is already contributing significantly to state and local revenues.
Chris Jacobson of Amazing Budz echoed concerns about the tax’s potential impact, particularly when combined with other financial burdens like tariffs and the Earned Sick Time Act. “These prices are going to skyrocket,” Jacobson noted, predicting a possible resurgence of the black market.
As of April 2024, Michigan had issued approximately 1,000 grower licenses and 293 adult-use retail licenses. Walsh described the state as having one of the most accessible markets globally, but also acknowledged the ongoing challenges of navigating a relatively new industry. “I do believe a lot of this is growing pains,” he said, noting the lack of established guidelines.
Following public discussion, Michigan legislators appear to have reconsidered the proposed tax. “It seemed like they sort of started stepping back away from this tax,” Walsh observed. Whitmer’s office remains open to negotiating the proposal’s specifics with lawmakers.
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