Recreational Cannabis Brings More Tax Revenue than Alcohol in Michigan

Key Points
  • Michigan collected nearly $100 million more in recreational marijuana excise taxes in the 2023 fiscal year compared to the previous year.
  • Recreational marijuana tax revenue totaled $266.2 million, a 49.1% increase from the year prior, surpassing the $192.6 million collected from the sales of beer, wine, and liquor in the state.
  • This reflects the strong consumer market for marijuana in Michigan and the different tax collection methods for each product.
  • The revenue from marijuana sales is benefiting communities that allow marijuana production and sales, with a portion of the tax revenue distributed to municipalities and counties.

This story was republished with permission from Crain’s Detroit and written by Dustin Walsh. 

Recreational marijuana is bigger than beer, wine, and liquor in Michigan.

During the 2023 fiscal year, which ended on Sept. 30, the state of Michigan collected nearly $100 million more in recreational marijuana excise taxes than in fiscal year 2022, according to a House Fiscal Agency report released last week.

The marijuana tax totaled $266.2 million, a 49.1% increase over the year prior, and 38% higher than the $192.6 million collected from the sales of beer, wine, and liquor in the state during the fiscal year.

The growing gap between beer, wine liquor, and recreational marijuana is representative of Michigan’s powerful marijuana consumer market, but also in how taxes are collected for each product.

Recreational marijuana is taxed at a 10% excise tax at the wholesale and consumer level. Alcohol wholesalers are responsible for a $6.30 per 31-gallon barrel excise tax on beer and a $0.51 per gallon excise tax on wine and champagne.

Michigan’s 6% sales tax is applied to all of the consumables but isn’t captured in the excise tax report.

The state’s marijuana market has seen a meteoric rise since recreational shops first opened in December 2019. During fiscal year 2023, Michigan dispensaries sold nearly $2.8 billion worth of recreational marijuana, topping off at $270.63 million in August.

The sharp increase in marijuana sales is paying dividends to communities that opt-in to allow marijuana production and sales.

From the taxes in fiscal year 2022, which included an additional $5.8 million in medical marijuana taxes, the state distributed $59.5 million to the 224 municipalities and counties participating in the sales of marijuana.

Under state law, counties split 30% of the tax revenue collected by recreational marijuana sales evenly with cities, townships, and villages, distributed based on the number of marijuana businesses in their borders. Each municipality allowing marijuana sales received $51,841.21 per licensed marijuana retailer or microbusiness in their community.

But less than 15% of Michigan’s 1,773 municipalities have opted in to allow marijuana sales, meaning nearly 1,000 communities receive no tax revenue sharing under Michigan marijuana regulations.

Half of the remaining 70% of marijuana tax dollars collected was distributed to the state’s School Aid Fund for K-12 education and the other half went to the state’s transportation fund.

But Michigan’s recreational marijuana taxes made up only a paltry 0.8% of the state’s $33.8 billion in tax revenue for the fiscal year. Income taxes continue to make up the bulk of the revenue at $12.3 billion, followed by $10.7 billion in sales tax, which does include marijuana.

Tobacco continues to be the dominant non-sales tax consumables tax, raking in more than $722.2 million at a $2 tax per pack of cigarettes in fiscal 2023.