(The Center Square) – The marijuana and nicotine industries could be facing substantial tax increases in Michigan, following the proposal of two plans by Gov. Gretchen Whitmer’s office.
One of those, the Mi Road Ahead plan which was announced this week, will invest $1 billion in local roads and $250 million in public transit programs throughout the state.
Part of that funding would come from levying taxes on the marijuana industry, which was first legalized in Michigan in 2018.
The plan labeled the current lack of a wholesale tax on marijuana 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.”
By implementing this tax, the state expects to raise $470 million, though other details are still unclear.
Michigan isn’t the only state considering tax increases on the marijuana industry, as Maine, Ohio and Maryland consider similar measures, making it a bipartisan movement.
Advocates for the industry responded to the claims about a tax loophole, stating that it’s “plainly not the case.”
“The Mi Road Ahead Plan implies that a tax on wholesale transactions is a part of Michigan’s tax regime. It absolutely is not,” said an article from Dykema’s Cannabis Law Blog, which argued the industry already pays its fair share of taxes with its 10% excise tax, in addition to Michigan’s 6% sales tax.
Whitmer also proposed a statewide tax on vaping and non-tobacco nicotine products, a part of her fiscal year 2025-2026 state budget recommendations.
This is a key priority for the Michigan Department of Treasury, closing 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 treasury said in a statement.
The budget proposes an ongoing $2.45 million expense for the administration of the tax, which includes “revenue collection, field enforcement, as well as licensing and compliance processes,” all conducted by the treasury.
Currently, non-cigarette tobacco products are taxed at a 32% wholesale rate, which is the same rate that Whitmer is proposing for marijuana and non-tobacco nicotine products. Non-tobacco nicotine products, which includes vapes, nicotine pouches, and nicotine gummies, do not have a wholesale or specific tax in Michigan.
The State Budget Office introduced the tax at a joint House and Senate Appropriations Committee meeting last week, stating that the rapid increase in the use of non-tobacco nicotine products is 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 similar 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 pointed out that 32 states now tax vaping products in some form, including all of Michigan’s neighboring states like Indiana, Illinois, Ohio, Wisconsin and Minnesota.
Elyse Apel is a reporter for The Center Square covering Colorado and Michigan. A graduate of Hillsdale College, Elyse’s writing has been published in a wide variety of national publications from the Washington Examiner to The American Spectator and The Daily Wire.
This article was originally published at www.thecentersquare.com
