When voters approved Proposal 1 in 2018, Michigan became the first state in the Midwest to legalize cannabis for adults 21 and older. Since then, the adult-use cannabis market has generated nearly $2 billion in tax revenue. This revenue, which in 2024 alone exceeded $520 million, is distributed to critical projects like schools, local governments, and our roads.

The current tax structure, which was set in the voter-approved initiative and makes legal cannabis an attractive and affordable option for consumers, is functioning as intended. In fact, Michigan sells more cannabis than any other state per capita largely, due to its prices and moderate taxes.

Michigan’s reasonable tax rate has also enabled the transition from the illicit market to the legal, regulated one in our state.

But last Thursday, the Michigan House of Representatives voted to impose a crushing new 24% wholesale excise tax on cannabis. This threatens to undermine this success by singling out cannabis consumers to foot the bill for projects like road repairs.

The 24% wholesale tax would be in addition to the current rate of 16% at retail, imposing a staggering tax burden. 

Cannabis consumers, many of whom use cannabis as an over-the-counter medicine, already pay more than their fair share. Any increase would raise costs for consumers, devastate an already strained industry, and fail to deliver the budget gains being projected.

Cannabis taxes are already disproportionately high when compared to other goods. Michigan’s excise tax on beer is only 20 cents per gallon, or well under 1% the price. This tax disparity is particularly striking because alcohol is objectively more dangerous and is not used as a medicine.

The proposed massive tax increase would also strike another blow to Michigan’s small cannabis businesses, which are already struggling. Faced with skyrocketing prices, consumers will likely look elsewhere, whether that be the underground market, the unregulated intoxicating hemp market, home cultivation or perhaps even across the border to states like Ohio, which has a 15.75% tax rate. Reduced sales would result in the closure and contraction of cannabis businesses, and Michiganders losing good jobs.

It’s also important to note that a significant amount of Michigan cannabis is sold to out-of-state residents, including to visitors from legal cannabis states with higher prices. Raising taxes would reduce or eliminate the number of people from Illinois and Ohio traveling to Michigan to buy more affordable cannabis. Not only would this harm Michigan-based cannabis businesses, but it would also fail to generate the projected budget gains, as cannabis sales and associated tax revenue would decline.

The Senate should reject this misguided and unfair tax. While roads need improvements, a new tax on cannabis is a shortsighted solution that will penalize consumers, harm businesses, and ultimately fail to deliver on its promise. Cannabis consumers — many of whom are using cannabis as a medicine — shouldn’t be singled out to shoulder this burden.