Michigan lawmakers bank on new marijuana tax to help fix state roads

Lansing’s latest plan to fix the roads with a new wholesale marijuana tax has industry leaders fuming—and Michigan stoners bracing for higher prices at the dispensary.

MICHIGAN—For years, “fix the damn roads” has been the rallying cry in Lansing. 

Gov. Gretchen Whitmer has repeatedly campaigned on it. State legislators have bickered over it. And Michigan voters still joke about it every time they cruise over a pothole on I-96. But this year, state lawmakers think they’ve finally found the magic asphalt money machine: weed.

Tucked inside a last-minute budget deal that is expected to avert a partial government shutdown this month is a new plan to slap a 24% wholesale tax on recreational marijuana. If passed, it’s projected to raise an additional $420 million a year to fund road repairs. And supporters are hailing it as a real bipartisan breakthrough after months of gridlock at the state Capitol.

But beneath the celebratory press releases from politicians, Michigan’s cannabis industry is staring down a fiscal cliff—and the consequences of a new tax could ripple far beyond the dispensary counter.

Potholes and pot 

The plan—House Bill 4951—sailed through the state House last week in a bipartisan, 78-21 vote following weeks of tense negotiations between Whitmer, Democratic state Senate Majority Leader Winnie Brinks, and Republican state House Speaker Matt Hall.

Whitmer had originally pitched a 32% wholesale cannabis tax in her “MI Road Ahead” plan. But after industry pushback and some political wrangling, the final proposal was trimmed to 24%. 

That’s still enough to generate nearly a half-billion dollars a year—and some lawmakers say it’s only fair for a massive, $3-billion-a-year industry to pitch in like tobacco and alcohol already do.

“This is the deal that [Brinks] came to with [Hall] and with the governor,” state Rep. Joseph Aragona (R-Clinton Township) told MLive, calling it the compromise needed to get a budget over the finish line. “We didn’t want to do it, we don’t like it, but this is the deal that was cut.”

Industry leaders are rallying in opposition. But if the state Senate approves the legislation as expected this week and it’s signed into law by Whitmer, the tax will take effect on Jan. 1, 2026. 

Higher prices ahead

On paper, the new state wholesale tax applies only to wholesalers—the growers and processors who are transferring the product to retailers. But in practice, those costs always roll downhill. Some dispensaries say they will have no other option but to pass them on to consumers.

“The processors are going to charge us that 24%. We’re going to have to pass it on to the consumer, which is unfortunate,” Stephen Ezell of Interlochen Alternative Health told UpNorthLive. “It’s basically going to weed out people like us. Small companies are not going to be able to survive. I kind of feel like they’re squeezing the last drop of blood out of us.”

The new tax will also create a big shift for a market that’s been racing to the bottom. 

Michigan’s weed is already the cheapest in the nation, with an ounce of flower averaging just $62 last month, down 23% from last year. Consumers love it. Businesses? Not so much. Profit margins have collapsed, dozens of companies are behind on taxes, and some of the biggest names in the industry are leaving Michigan in search of higher profit margins in other states.

Layer a 24% tax on top of Michigan’s existing 10% excise tax and 6% sales tax, and the state will suddenly vault from one of the lowest-taxed weed states to the second-highest in the country, just behind Washington’s 37% rate. Industry insiders say that’s not just bad news for local stoners; it risks erasing Michigan’s edge as a regional destination for out-of-state buyers. 

“There will be no reason for them to come here,” Robin Schneider, head of the Michigan Cannabis Industry Association (MCIA) told MLive—also noting that growers and producers who don’t absorb the extra costs will likely lay off their staff or close up shop altogether.

Industry survival mode

Inside the state’s cannabis industry, the reaction was swift—and bleak. “Absolutely horrendous,” Andrew Sereno of Glacial Farms told Crain’s Detroit Business. Mike DiLaura of House of Dank also told the Detroit News that the new tax will effectively “decimate the industry in Michigan.”

They’re not exaggerating the stakes. Roughly 40,000 Michiganders work in the state’s cannabis industry, which pumped $331 million into state coffers through excise taxes in 2024. And those taxes, as designed, already cover more than $100 million in road repairs across the state.

But many operators are still hanging on by a thread. Unlimited licensing has fueled oversupply.  Wholesale prices are cratering. And many small businesses are closing or consolidating with corporate giants. A tax this steep, critics say, accelerates the collapse—leaving fewer jobs, fewer mom-and-pop growers, and more customers tempted back to the illicit market.

California tried something similar last year, hiking cannabis taxes to 25%. Sales immediately tanked, the black market flourished, and Gov. Gavin Newsom rolled the hike back by summer. Industry veterans warn Michigan is walking the same road—and not the freshly paved kind.

“What’s 24% of nothing?” cannabis consultant Chris Silva told the Detroit Free Press. “It’s going to put half these people out of business. … Soon the value of that tax won’t make sense.”

Legal roadblocks ahead

Even if the state Senate signs off on the legislation this week, this tax might not stick.

Opponents are already reportedly preparing to sue, arguing the state Legislature doesn’t have the authority to pile new taxes onto a system voters approved at the ballot box in 2018.

That law legalized recreational marijuana, imposed a 10% excise tax, and explicitly earmarked a share for road repairs. Under Michigan’s Constitution, any amendment to a voter-initiated law requires a three-quarters supermajority in both chambers. The House fell five votes short.

Lawmakers insist they sidestepped that hurdle by creating an entirely new act—the Comprehensive Road Funding Tax Act—instead of directly amending the old one. But attorneys with the MCIA are already drafting legal challenges and eyeing an injunction if the tax is passed.

“There’s going to be a hassle with this whether it passes or doesn’t pass,” Jamie Lowell, president of Michigan NORML, told MLive this week. “If it passes, there’s going to be a legal challenge on it for not amending the act and for circumventing the voter intent.”

The bottom line

On the surface, Lansing’s new plan looks like a neat political solution to a longstanding problem: potholes get patched, the budget gets balanced, and the cannabis industry foots the bill.

But beneath the headline number, the tradeoffs are messy. Consumers will almost certainly pay more. Small businesses may get squeezed out of existence. Workers could lose jobs. And the state might even end up collecting less revenue, not more, if sales sink under the tax. 

For lawmakers, $420 million a year is an irresistible pot of cash. But for Michigan’s cannabis community, it could mean far less green—and a lot rougher than the roads it’s supposed to fix.

READ MORE: 6 quick hits of cannabis news from across Michigan

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