When Gov. Gretchen Whitmer announced the Pot for Potholes initiative — a high tax on marijuana sold or transferred to a retail shop that will be used to fund road repairs — as part of her “Mi Road Ahead” funding plan in February 2025, the cannabis industry was already vulnerable. Last year, the industry suffered its first decline in sales revenue since recreational cannabis was legalized in 2019 — due to low prices brought on by market saturation. Since then, the price of weed has continued to plummet.

Now, the 24% wholesale tax that went into effect on Jan. 1, 2026, has sparked concern within the industry.

Joni Moore, co-owner of Higher Love, a chain of dispensaries in the Upper Peninsula, felt the effects immediately.

Right before Christmas, Higher Love was forced to lay off 61 employees — roughly 28% of its workers across nine locations — as it prepared to bear the costs of the tax increase.

“I think there’s a public perception that cannabis has a lot of money, but the tax now is a total of 67% on every dollar that we bring in,” says Moore. “So when you add up the state taxes, plus the federal taxes, and then the costs of running a business, you’re not left with very much.”

Lawmakers estimate that the new tax will bring in $420 million in additional revenue to go toward the $1.8 billion funding plan. The majority of the funds will be deposited into the new neighborhood road fund to be utilized for state and local road repairs as well as bridge improvements. But for business owners like Moore, this move signals that the previous pro-cannabis atmosphere in Michigan has changed.

“Michigan is not very friendly to cannabis right now,” says Moore. “We’re not closing any stores, but our energies are going to be looking elsewhere. We have other investments we’re looking at because clearly, we aren’t very welcomed in Michigan right now.”

After the cannabis tax passed the House and Senate, Gov. Whitmer signed it into law as part of the fiscal year 2026 budget on Oct. 7, 2025. The Michigan Cannabis Industry Association filed a lawsuit against the tax the same day. In the suit, the MiCIA argues that the tax violates the Michigan Constitution because it was not achieved through a three-fourths vote in the Legislature, a requirement to amend the 2018 law that legalized recreational cannabis in Michigan.

As of publishing, the lawsuit is still making its way through the Court of Claims. The MiCIA, which represents 400 cannabis businesses, believes this bill could have wide-reaching effects that go beyond government spending.

“We’re hearing from members who are making impossible decisions about layoffs and potential closures as a direct result of this unconstitutional wholesale tax,” says Rose Tantraphol, a spokesperson for MiCIA. “This tax threatens 47,000 Michigan jobs and risks driving consumers back to the illicit market, driving consumers back to the illicit market, when they approved legalization in 2018.”

Moore agrees, pointing to California as an example of increased taxation driving consumers back to illegal sellers. On Sept. 22, 2025, Gov. Gavin Newsom of California signed legislation reversing a similar 25% cannabis tax in an effort to revive the legal industry.

Michigan is currently one of the largest cannabis markets in the country, but that status could now be in jeopardy. It’s still too early to tell how catastrophic the fallout from the tax may be, but the latest push puts an already sensitive market in an even tougher position.