Michigan’s new $420 million cannabis tax plan sparks backlash

MICHIGAN
Michigan to become the latest market to hike taxes

The Michigan legislature narrowly passed a new state budget, 19-17, on Oct. 3, which includes a new 24% tax on wholesale cannabis intended to support road construction and repairs. The contentious new budget comes as Michigan faces a possible state government shutdown.

State operators, who already contend with state-wide oversupply and depressed prices, rallied against the tax last week to no avail.

What They’re Saying: "This specific tax increase to help fund roads is detrimental to many small businesses in the district I represent and across the state. We should be seeking to grow independent businesses in Michigan, not destroy them." Republican Rep. Timmy Beson said.

And also: “Levying a new 24% wholesale tax on Michigan's cannabis industry undermines the significant progress made in one of the nation’s strongest cannabis markets. The industry has delivered 47,000+ jobs, increased consumer safety, and generated reliable tax revenue for the state. This new tax reverses this, and may actually lead to less tax revenue collection due to fewer legal sales and an uptick in illicit market transactions," said Rodney Holcombe, VP for Public Policy at LeafLink.

The average price of flower in the state is $82.72 per ounce, according to a Michigan Cannabis Regulatory Agency report covering the month of August.

Consumers in Michigan already have to pay a 10% excise tax and a 6% sales tax on cannabis. This new tax applies to wholesale operators, which will likely trickle down to consumers.

A financial analysis of the bill by the Senate Fiscal Agency suggests that the new tax could generate an additional $420.7 million in annual revenue. This estimate includes an assumption that the new taxes will cause a 14.4% drop in consumption.

Similar hikes in other states: Earlier this year, Maine's legislature passed a cannabis tax increase going from 10% to 14% as of Jan. 1, 2026. On the eve of Minnesota's adult-use market, the state increased the tax rate from 10% to 15% as part of a larger state budget deal.

Last month California Gov. Gavin Newsom signed a bill that rolled back his own cannabis tax hike, returning the rate back to 15% from the proposed 19%.

Our take: The legal cannabis industry, with its paper-thin margins, has never quite achieved its promised potential of being a tax revenue cash cow. Unfortunately, states still have not figured this out.

In terms of expected annual revenue, $420 million is a suspiciously-convenient figure. We can’t help but wonder which stats were gently nudged in order to land on a number that everyone reading this knows is iconic.

We just hope that the expected 14.4% decrease in sales is an overestimate, but we’re not optimistic.  

-ZH

Shuttered NY lab faces penalties and industry ban 🔬

Lexachrom Analytical Lab is facing a $2 million fine and a three-year ban from New York's cannabis industry, months after the state announced a recall in July on products that the lab allegedly failed to properly test before allowing them to enter the market. Operators told the New York Times that they were in the process of shutting down the company for good. 

New Hampshire lawmakers advance for-profit conversion for medical dispensaries 💰

The Granite State's House Finance Committee approved a measure that would allow the state's three medical retail companies to convert from non-profit to for-profit entities. The three companies have had to endure unsuccessful annual attempts from the legislature to legalize adult-use. Mairjuana Moment has more. 

Alabama litigants have to wait their turn ⌚

While Alabama medical cannabis patients continue to wait for a market that was legalized four years ago, a federal judge order halted a lawsuit against state regulators in deference to an ongoing lawsuit on the state level. Alabama has struggled to launch its medical market, with repeated attempts to issue licenses that have been stymied by lawsuits concerning the selection process. 

Major illegal cannabis bust in Canada 👮

Last week, Ontario provincial police seized over $122 million worth of illicit cannabis as part of an investigation into Tyendinaga Mohawk territory in eastern Ontario. Police confirmed the illegal grow operation was primarily managed by non-indigenous criminals. The bust included 72,000 illegal plants, guns, and other illicit items. 

New York considers the benefits of psilocybin 🍄

Last Tuesday, lawmakers in New York’s Assembly Health Committeeheld a meeting discussing the medical merits of psilocybin in “magic mushrooms” and revisited Amy Paulin’s (D) (the chair of the committee) legalization bill for the substance introduced last year. The conversation included interest from both political parties with Assembly member Josh Jensen (R) expressing optimism.

Vireo Growth to acquire Schwazze debt 💸

Vireo Growth, a Minnesota-based cannabis MSO, announced on Oct. 2 that it has agreed to acquire 86% of Schwazze's outstanding senior debt. Schwazze, formerly known as Medicine Man, is an MSO with retail operations in Colorado and New Mexico. The company has been dealing with cashflow problems as its debt was reaching maturity in early 2025.

Cantrip launches a spirit-style THC drink 🍸

The cannabis beverage company announced the launch of Elixir, a blue, cloudy drink intended for use as a mixer similar to vodka or on the rocks with about 10mg per shot. 

Tynan Phelan, Director of Recruitment Operations at White Ash Group, has relocated to Spain to lead the company's expansion into the European cannabis market.

Platform Cannabis Advisors, a cannabis finance and consulting company, is looking to expand its real estate work. Toward that end, the company is looking for two-to-three interns.

Talking politics and cannabis reform on The Corner Office podcast

Our very own Jeremy Berke was a guest on The Corner Office Podcast. Check out the video on Youtube to hear Jeremy opine about President Trump's non-committal commitment to reform federal cannabis policy as well as the broader state of legalization.