Whitmer’s proposed cannabis tax hike sparks fury

Michigan’s cannabis industry, already reeling from oversupply and plummeting prices, is facing a new threat: Gov. Gretchen Whitmer’s proposed 32% wholesale tax on recreational marijuana. The tax, part of her ambitious budget plan to fund road repairs, has ignited a firestorm of backlash from operators who say the move could decimate an already fragile market.

Whitmer’s proposal aims to generate an additional $470 million for infrastructure, but industry leaders argue the timing couldn’t be worse. Cannabis sales in Michigan dipped for the first time in years last month, while production capacity remains alarmingly high. This oversupply has driven prices to unsustainable lows, forcing many businesses to shutter. For those still standing, the proposed tax feels like a death knell.

“This is a betrayal,” Matt Imig, owner of Lansing-based M&M Agriculture, said, echoing a sentiment shared across the industry. Whitmer, once hailed as a staunch ally of cannabis reform, now faces accusations of abandoning the very community that helped propel her political career. Social media groups and email chains are flooded with angry posts from operators and activists — many of them Democrats — who feel blindsided by the move.

The proposed tax would require wholesalers to remit payments monthly, a change that could upend the industry’s financial dynamics. Smaller retailers, already operating on razor-thin margins, rely on 30- to 90-day credit terms to manage cash flow. A shift to cash-on-delivery terms, or paying for product as soon as its delivered, would leave many unable to stock inventory, effectively pushing them out of the market. Add in the federal government’s crippling 280E tax provision, which denies cannabis businesses standard deductions, and the financial strain becomes unbearable.

But the tax hike isn’t the only challenge Michigan’s cannabis operators are grappling with. The rise of intoxicating hemp-derived products — sold without the same regulatory burdens — has created an uneven playing field. These products, often marketed as legal alternatives to cannabis, are cutting into the market share of licensed operators who face hefty compliance costs. Despite repeated calls for action, the state’s Cannabis Regulatory Agency has been criticized for its inconsistent enforcement, cracking down on minor infractions while turning a blind eye to widespread practices like the illegal importation of THCA concentrate from other states or the use of MCT oil to thin out distillate, which was banned by the CRA in June but is still thought to be occurring in much of the supply.

“The CRA is heavy-handed on the small stuff but lets the big issues slide,” cannabis advocate Thomas Lavigne said in an email. “It’s infuriating.”

Whitmer’s tax proposal has also raised concerns about the future of equity in the industry. Smaller operators and social equity applicants — business owners from communities that have been disproportionately affected by the prohibition of cannabis — would be hit hardest by the tax hike. Meanwhile, deep-pocketed multi-state operators could weather the storm, consolidating their dominance in a market that was built on the backs of caregivers and small businesses.

Michigan isn’t alone in targeting cannabis as a cash cow. States like California, Ohio, Maine and Maryland are also eyeing higher excise taxes to bolster their budgets. But Michigan’s market, with its glut of operators and fierce competition, is uniquely vulnerable. In California, for example, the oversupply and regulatory maze mirror Michigan’s challenges, but the sheer number of operators here makes the impact of a tax hike far more severe.

The federal landscape offers little relief. While the Biden administration has taken steps toward rescheduling cannabis, recent moves by Republican lawmakers threaten to maintain the 280E tax burden even if rescheduling occurs.

For Michigan’s cannabis community, the message is clear: The fight isn’t over. What began as a bipartisan effort to legalize and regulate cannabis has morphed into a bipartisan assault on the industry’s survival. Patients, caregivers and advocates who banded together to end prohibition now find themselves battling new threats from all sides.