Michigan marijuana tax proposal prompts protest, threat of lawsuits

Michigan marijuana operators are up in arms over a massive new tax increase that bipartisan state politicians say will fund road improvements.

Hundreds of cannabis advocates showed up at the state Capitol in Michigan on Tuesday to protest a new, proposed 24% wholesale tax that may also trigger a lawsuit in response, The Detroit News reported.

Michigan’s $3.2 billion annual cannabis market is the country’s second-biggest after California.

However, operators say the market is saturated with too many operators and too much supply.

And such a large and sudden tax hike could disrupt the industry further.

New Michigan marijuana wholesale tax could raise $420 million for roads

Since February, Democratic Gov. Gretchen Whitmer and Republicans in the state legislature have been pitching a huge cannabis tax hike to fund repairs to the state’s crumbling infrastructure.

Last week, the state House approved slapping a 24% wholesale tax starting in January 2026.

That could raise as much as $420 million a year to pay for road and bridge improvements, according to an official state analysis.

But such a significant increase in costs for cannabis consumers will “damage the industry,” resident George Lynch told the News.

High taxes are blamed for falling legal marijuana store sales and the illicit market’s staying power in other states.

Such a tax hike may also be unconstitutional, the Michigan Cannabis Industry Association believes.

Michigan cannabis industry operators weigh lawsuit to cancel tax hike

According to Bridge Michigan, the industry group is considering suing on the grounds that the tax hike changes the state’s voter-approved 2018 adult-use legalization law.

However, lawmakers told the news organization that they’re on solid legal ground.

What’s more, Michigan cannabis companies aren’t “doing as bad as they say they’re doing,” according to state Rep. Alabas Farhat of Dearborn.

In his analysis, Michigan marijuana taxes lag behind other states.

Michigan cannabis sales are subject to a 10% excise tax and the state’s 6% sales tax.

That’s slightly lower than a national median of 17% observed by researchers from the Ohio State University in 2023.

Other states have hiked cannabis taxes to cover budget shortfalls this year.

Only California has changed course, with Gov. Gavin Newsom recently signing a bill into law that cancels a recent hike in the state excise tax from 15% to 19%.