Michigan Lawmakers Approve New 24% Wholesale Cannabis Tax

Michigan lawmakers have passed a budget proposal that includes adding a new 24% wholesale tax on the cannabis industry.

The House passed the proposal within hours of its unveiling last month, 78-21, and the Senate narrowly passed the proposal in a 19-17 vote on Friday. Lawmakers were moving quickly to set the state budget to avoid a government shutdown.

Under the budget, the new wholesale tax is expected to generate $420 million annually, which will primarily be used to fund road construction and repairs.

But Michigan cannabis representatives say the tax will harm the industry and put consumers at risk by pushing them toward the illicit marketplace.

“It’s like a gut punch to the industry. We’re already overtaxed from the federal government, we were already taxed heavily from the state government, and now to have a 24% increase, a lot of people are going to figure out whether this industry is worthwhile.” — Al Williams, President of the Detroit Cannabis Industry Association, via Local 4

Meanwhile, Gov. Gretchen Whitmer (D) told the local news station that the 24% tax rate “actually makes us commensurate with other states in our region.”

“It is not out of line, and it’s not even close to the tobacco tax on tobacco products or taxes on alcohol,” the governor said. It should be noted, however, that alcohol and tobacco are not on the Schedule of Controlled Substances, which means that alcohol and tobacco businesses are permitted to deduct expenses like rent and marketing from their federal taxes: meanwhile, state-legal cannabis businesses are not able to do so.