Detroit’s burgeoning cannabis industry is sounding the alarm over a proposed 24% wholesale tax, warning that Michigan House Bill 4951 could lead to widespread business closures, significant job losses, and a resurgence of the illicit market. The bill, which passed the Michigan House of Representatives on September 25, 2025, aims to generate an estimated $420 million annually for road repairs and infrastructure improvements, but industry stakeholders argue it imposes an unsustainable financial burden.
A New Tax Layer for Cannabis
Michigan House Bill 4951, also known as the Comprehensive Road Funding Tax Act, introduces a new 24% excise tax levied on the wholesale price of marijuana. This tax will apply to various transactions within the supply chain, including sales from marijuana establishments to retail licensees, and from provisioning centers to retailers. For vertically integrated businesses, the tax will apply to product they cultivate and process for their own retail sale. Scheduled to take effect on January 1, 2026, this legislation is a significant development in cannabis policy news.
Stacking Taxes and Thin Margins
This proposed wholesale tax is layered on top of Michigan’s existing taxation for recreational cannabis. Consumers already face a 10% excise tax and a 6% state sales tax, totaling 16%. The addition of a 24% wholesale tax could push the effective tax burden on cannabis products to nearly 40% or even higher, due to how the ‘wholesale price’ is defined, which includes other taxes and fees, creating a “tax on a tax” scenario. Industry insiders point out that many Michigan cannabis businesses, particularly smaller operations, are already operating on razor-thin margins in an oversaturated market with historically low wholesale prices.
Industry Voices of Concern
Leaders within Detroit’s cannabis community and across Michigan are vehemently opposing the bill. Stuart Carter, founder of the Detroit Cannabis Industry Association (DCIA), stated that the proposed tax would shake up the entire industry. Businesses fear that they will be forced to pass these increased costs onto consumers, leading to higher retail prices. This could not only alienate customers but also drive them to seek cheaper alternatives in the illicit market, mirroring negative trends observed in states like California where high taxes have been blamed for a struggling legal market.
“If we are forced to cut back, there’ll be layoffs and those people, those hourly workers, will be the first to go, unfortunately,” said Carter. Other business owners echoed these sentiments, expressing concern for job stability and the survival of small and social equity licensees who may lack the capital to absorb such a substantial tax increase.
Potential Economic Fallout and Legal Challenges
Critics argue that the projected $420 million in annual revenue from the new tax is overly optimistic and fails to account for the potential market contraction and loss of tax revenue from failing businesses and increased black market activity. Robin Schneider, director of the Michigan Cannabis Industry Association (MICIA), noted that a significant portion of Michigan’s cannabis revenue comes from out-of-state customers, who may no longer find Michigan competitive with its higher tax rates. MICIA is reportedly considering legal challenges, asserting that the tax hike may unconstitutionally alter the voter-approved 2018 legalization law without the required supermajority vote.
A Shifting Market Landscape
The proposed legislation comes at a time when the Michigan cannabis market is already experiencing significant challenges, including oversupply and price compression. The passage of HB 4951 by the House, with bipartisan support but minimal industry consultation, has generated considerable debate and concern about the future trajectory of cannabis events and news in the state. As the bill moves to the Senate, the cannabis industry is mobilizing to advocate against it, emphasizing the potential for devastating consequences for businesses, workers, and the overall economic health of Michigan’s regulated cannabis sector.
As of early October 2025, the bill’s future in the Senate remains uncertain, leaving the industry in a state of anxious anticipation regarding upcoming legislative events.
