Michigan’s Weed Tax Money to Be Used for ‘Road Repair’
Michigan Governor Gretchen Whitmer signed into law a controversial 24% wholesale excise tax on cannabis transfers between cultivators/manufacturers and retailers. The new tax is expected to substantially increase the price of cannabis in the Great Lake State. Here’s a breakdown of what will happen as the tax is effectuated from January 1, 2026.
Michigan’s new marijuana tax is part of Whitmer’s long-standing promise to “fix the damn roads” — and it has ignited strong backlash from marijuana businesses and industry advocates. In times of nationwide discussions about removing some of the tax burden for cannabis operators, the law signed by Gov. Whitmer is an example of the opposite.
If not stopped by lawmakers, the whopping 24% wholesale excise tax will apply for the adult-use market in addition to the existing 10% retail excise tax and the 6% general sales tax. It is expected to take effect on January 1, 2026.
Michigan’s New Cannabis Tax: Whitmer Signs 24% Wholesale Levy to Fund State Roads
The new tax addition for Michigan’s cannabis market will make the state one of the most heavily taxed cannabis economies in the U.S. Under the newly proposed system, cannabis operators will be taxed at the point of wholesale transfer. This means taxation when the product is sold to another retailer or internally moved within vertically integrated companies.
State officials estimate the policy could generate around $420 million per year, which will be allocated for infrastructure improvements. More specifically, the revenue will feed into a new Comprehensive Road Funding Fund, with much of it directed toward local and neighborhood road repair projects.
“When I took office, I made a promise to fix the damn roads so Michiganders could get where they’re going faster and safer,” Whitmer said in a statement. The governor defended the tax as a pragmatic way to secure funding without further burdening non-cannabis taxpayers.
Signing the legislation behind closed doors, she said this is a “fair and sustainable way” to support road repair in Michigan, and dubbed the plan as a “commonsense reinvestment in our communities.” But her plan is set to significantly derail a market that has reached about $3.27 billion in 2024, a gain of roughly 9.9% over 2023.
Economic and Legal Pushback
The Michigan Cannabis Industry Association (MiCIA) and several dispensary owners have voiced sharp criticism, arguing the tax will raise prices, squeeze small businesses, and drive consumers back to the illicit market. Early projections suggest legal sales could drop by at least 15% as a result of higher retail costs.
“This massive tax increase is really going to hurt the legal market in Michigan,” said Adam Hoffer, director of excise tax policy at the Tax Foundation, his words echoing concerns from critics.
Beyond the economic concern, the new tax faces constitutional scrutiny. Opponents claim the law erroneously alters the Michigan Regulation and Taxation of Marihuana Act (MRTMA) — the voter-approved initiative from 2018 — without the required supermajority vote in the Legislature. MiCIA has filed suit, contending that only voters or a three-fourths legislative vote can modify core provisions of the MRTMA.
Still, many in the marijuana sector see the new levy as a threat to Michigan’s competitive cannabis market. Industry analysts warn that the combination of higher costs and regulatory uncertainty could stall investment and expansion across the state.
What Comes Next
The 24% Michigan cannabis wholesale tax is scheduled to go into effect in 2026, unless courts intervene. Legal challenges are expected to play out through the rest of 2025, potentially delaying implementation
For now, cannabis operators are bracing for impact — and hoping lawmakers reconsider a tax that some say could undo years of progress in legitimizing Michigan’s cannabis economy.
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Stephen Andrews
