Michigan’s cannabis industry leaders are sounding the alarm about an impending 24% wholesale tax on marijuana that is set to take effect in January, warning it could drive consumers to the illegal market and put small operations out of business.
“It’s like a gut punch to the industry,” said Al Williams, president of the Detroit Cannabis Industry Association. “We’re already overtaxed from the federal government, we were already taxed heavily from the state government, and now to have a 24% increase, a lot of people are going to figure out whether this industry is worthwhile.”
The new tax, part of the new state budget passed by the Michigan House and Senate early Friday, aims to generate an estimated $420 million annually for road construction and repairs.
The measure passed the Senate by a narrow 19-17 vote as part of the larger budget framework.
Williams, who heads several dispensaries throughout Michigan, including DACUT dispensary in Detroit, warns consumers will see significant price increases starting in the new year.
“In some cases, it’s going to be three to four dollars per gram of an increase,” Williams said. “Your gummies are going to go up, anything that’s processed is going to go up, and of course, regular flower is going to go up too.”
Industry leaders argue the tax increase will push more consumers toward purchasing unregulated black-market products.
Williams pointed out that dispensaries already face steep costs to maintain regulatory compliance.
“We’re already getting beat over the heads by the cannabis regulatory authority with basic fees,” Williams says. “It costs me ten to twenty thousand dollars if I have a misprint on one of my tags.”
Williams said the new tax could be a major hit for smaller cannabis operations, especially in urban areas.
With Michigan’s cannabis market already oversaturated, industry leaders predict the additional tax burden could be the breaking point for some businesses.
Williams pointed to California Governor Gavin Newsom’s recent decision to roll back a 25% tax increase on California’s legal cannabis industry.
“People are going to lose their jobs, unfortunately,” Williams said. “Some smaller growers, especially here in urban cities like Detroit and Flint, are not going to be able to survive at all.”
In an interview with Local 4, Michigan Governor Gretchen Whitmer said that while she’s sympathetic to the burden the tax is putting on cannabis businesses, the tax is comparable to other states where marijuana is legalized.
“The 24% actually makes us commensurate with other states in our region,” Whitmer said. ”It is not out of line, and it’s not even close to the tobacco tax on tobacco products or taxes on alcohol.”
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