Detroit, Mic. (DDN) – Michigan’s marijuana and nicotine sectors might face significant tax increases after Gov. Gretchen Whitmer’s office proposed two options.
One of these, the Mi Road Ahead initiative, was launched this week. It would invest $1 billion on municipal roads and $250 million in public transit projects across the state.
A portion of the financing would come from taxes on the marijuana sector, which was initially allowed in Michigan in 2018.
The concept described the present lack of a wholesale tax on marijuana as a “loophole.”
“After voters legalized marijuana, the industry has grown exponentially thanks in part to Michigan’s industry-friendly taxes, the fourth-lowest in the nation,” the governor’s office said in a statement. “The industry, which recorded billions in sales in 2024, uses Michigan roads to transport marijuana multiple times throughout the process, including to grow operations, testing labs, distribution hubs, and finally retail stores.”
The state hopes to raise $470 million by adopting this tax, however other details remain unknown.
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Michigan is not the only state proposing marijuana-related tax increases; Maine, Ohio, and Maryland are also considering similar measures, indicating a bipartisan movement.
Advocates for the sector responded to charges of a tax loophole by noting that it is “plainly not the case.”
“The Mi Road Ahead Plan implies that a tax on wholesale transactions is part of Michigan’s tax system. It obviously is not,” according to a post on Dykema’s Cannabis Law Blog, which argues that the sector already pays its fair share of taxes through a 10% excise tax in addition to Michigan’s 6% sales tax.
Whitmer also suggested a statewide tax on vaping and non-tobacco nicotine products as part of her fiscal year 2025-2026 state budget proposals.
This is a top goal for the Michigan Department of Treasury: eliminating another tax “loophole.”
“This closes a loophole and brings these products in line with how the state taxes other products, following 32 states and all our Midwestern neighbors,” the governor’s office stated in a statement.
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The budget recommends a $2.45 million annual expense for tax administration, which includes “revenue collection, field enforcement, as well as licensing and compliance processes,” all of which are carried out by the Treasury.
Non-cigarette tobacco items are now taxed at a wholesale rate of 32%, the same percentage proposed by Whitmer for marijuana and non-tobacco nicotine products. Non-tobacco nicotine products, such as vapes, nicotine pouches, and nicotine gummies, are not subject to wholesale or particular taxes in Michigan.
The State Budget Office proposed the levy at a joint House and Senate Appropriations Committee meeting last week, citing the rapid rise in usage of non-tobacco nicotine products as a “public health concern.”
“To address this ongoing public health concern and close a loophole, the budget proposes taxing vaping and non-tobacco nicotine products similarly to tobacco products,” said Kyle Guerrant, the deputy state budget director. “With all revenues supporting smoking and cancer prevention, youth mental health and physical health, and access to health care.”
Guerrant also stated that 32 states now tax vaping items in some way, including Michigan’s bordering states of Indiana, Illinois, Ohio, Wisconsin, and Minnesota.
Reference: Michigan considers vape, marijuana taxes
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