Michigan’s leading cannabis trade group on Tuesday filed a lawsuit challenging the new 24% wholesale tax Gov. Gretchen Whitmer recently signed into law.
The lawsuit, filed in the state Court of Claims by the Michigan Cannabis Industry, seeks to block the tax, scheduled to take effect on Jan. 1, and asks the court to declare it unlawful, according to MLive.com.
The tax emerged from bipartisan budget negotiations between the Republican-controlled House, the Democrat-majority Senate and the governor, who earlier this year proposed a 32% wholesale marijuana tax aimed at raising $470 million for road repairs.
The reduced tax is expected to generate $420 million for road work.
“The 24% wholesale tax on cannabis passed by the Michigan Legislature and signed into law by Gov. Whitmer is unconstitutional in multiple respects,” the Michigan Cannabis Industry’s legal team said in a statement.
“The lawsuit (also) details how the last-minute, late-night process occurred in violation of a range of other constitutional provisions. The Association is asking the court to strike the tax in its entirety.”
Michigan’s $3.2 billion annual cannabis market is the second largest in the U.S., trailing only California.
Operators argue that the market is already saturated with an excess of businesses and supply.
They warn that a significant and abrupt tax increase could further destabilize the industry.
Michigan voters approved the recreational use of marijuana through a 2018 ballot initiative, which established a 10% excise tax on retail cannabis sales, allocating 30% of the revenue to local and county governments, 35% to schools and 35% to road and bridge projects.
Last year, the tax contributed nearly $116 million to road funding.
Under the state Constitution, any amendments to a voter-initiated law must either be approved by a public vote or pass with a three-quarter supermajority of both the state House and Senate.
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