Marijuana Moment: Michigan Lawmakers Pass Marijuana Tax Increase That’s Projected To Bring In $420 Million In New Revenue Every Year

2025-09-26T12:47:15Z

“Everyone knows that a large increase in cannabis taxes drives customers straight back to the illicit market. That means businesses are going to fail, jobs will be lost and less tax revenue will be collected.”

By Jordyn Hermani, Bridge Michigan

This story was originally published by Bridge Michigan, a nonprofit and nonpartisan news organization. To get regular coverage from Bridge Michigan, sign up for a free Bridge Michigan newsletter here.

A plan to raise money for road repairs by increasing marijuana taxes quickly advanced through the Michigan House late Thursday as part of what officials called a larger framework for a state budget deal.

The proposed Comprehensive Road Funding Tax Act would impose a 24 percent tax on the wholesale price of marijuana sold or transferred to a retail shop, beginning in January.

That would generate an estimated $420 million a year, according to the nonpartisan House Fiscal Agency. Most of the funding from the proposed Comprehensive Road Funding Tax Act would go into a new Neighborhood Road Fund for local roads and bridges.

The pot tax proposal passed the Republican-led House with bipartisan support in a 78-21 vote just hours after it was unveiled, with opposition from 10 Republicans and 11 Democrats. It now goes to the Democratic-led Senate for further consideration.

A separate bill approved Thursday—and tied to the pot tax proposal—would extend new federal income tax exemptions on tips and overtime pay to state filers for three years. That would benefit qualifying workers but cost the state more than $150 million annually between 2026 and 2028, according to the fiscal agency.

The votes came shortly before Gov. Gretchen Whitmer, Senate Democratic Leader Winnie Brinks and Republican House Speaker Matt Hall announced a framework agreement to pass the budget before a potential government shutdown next week.

That will include a road funding plan totaling between $1.5 billion and $1.8 billion in annual funding, according to Hall, R-Richland Township.

The full plan could also include redirected business incentive funding, along with a sales and gas tax swap that would ensure all taxes that motorists pay at the pump go toward road repairs.

“There’s still a lot of work to do here over the next few days to work out details, but this large framework…is putting us on that path to get this thing done on time,” Hall said of the larger state budget.

The proposed 24 percent wholesale tax rate on marijuana is lower than the 32 percent Whitmer initially proposed in her own roads plan, but industry groups say it could still devastate the Michigan market.

“Everyone knows that a large increase in cannabis taxes drives customers straight back to the illicit market,” said Robin Schneider, director of the Michigan Cannabis Industry Association.

“That means businesses are going to fail, jobs will be lost and less tax revenue will be collected.”

The recreational marijuana law approved by Michigan voters in 2018 includes a 10% excise tax on retail sales, in addition to the state’s 6% sales tax.

Margins for Michigan marijuana businesses are already “very thin,” and additional taxes could force price hikes that deter purchases by residents from border states who shop here, Schneider said.

The pot tax proposal won bipartisan support in the Republican-led House, however.

Rep. Alabas Farhat, D-Dearborn, told reporters he doesn’t think marijuana companies are “doing as bad as they say they’re doing” based on the number of billboards he sees on Michigan highways.

“We are heavily behind our peer states on where we ought to be on a wholesale tax,” he said, adding that Michiganders deserved to have “high quality roads that they can depend upon.”

Hall, however, was slightly more sympathetic to industry concerns surrounding the 24% wholesale tax, saying that Republicans were able to talk Whitmer down from her initially proposed 32% tax rate, which they thought were “too high.”

The House also approved two additional bills, tied to the road funding plan and the larger state budget debate.

One could allow Michigan to continue a Medicaid provider tax—if the Whitmer administration secures a federal waiver—otherwise in jeopardy because of President Donald Trump’s “big beautiful” tax-and-spending cut law.

The other would exempt tips and overtime pay from state income taxes. It would also “decouple” a handful of state and federal income taxes to preempt any potential state revenue losses from the Trump law.

Both of those bills passed the state House in 95-4 votes.

A fourth bill—part of a larger House Republican roads package which passed the chamber in March—is also tied to the package but could be changed by the Senate before final passage.

There is less than a week left until October 1, the constitutional deadline for when the state must have a balanced budget signed into law—or face a government shutdown.

This article first appeared on Bridge Michigan and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.