A Michigan state representative is pushing to eliminate a recently implemented 24% cannabis tax that operators say has triggered a wave of retail closures and cratered sales across the state's adult-use market.
The tax, which took effect earlier this year, has drawn fierce criticism from dispensary owners who report double-digit sales declines and mounting pressure to shutter locations. At least a dozen stores have closed since the levy was implemented, according to industry estimates.
Rep. John Damoose, who represents portions of northern Michigan, called the tax "deceitful" in comments to local media, arguing that voters who approved adult-use cannabis in 2018 never intended for such a steep levy. The state already collects a 10% excise tax on recreational sales, plus the standard 6% sales tax.
"This is not what Michigan voters signed up for," Damoose said. "We're watching a legitimate industry get strangled by excessive taxation."
The Numbers
The 24% tax represents a significant jump from Michigan's previous tax structure. Combined with existing levies, consumers now face an effective tax rate approaching 40% on adult-use purchases—among the highest in the nation.
Sales data from the Cannabis Regulatory Agency shows a 15-18% decline in transactions at affected retailers during the first quarter following implementation. Several operators report even steeper drops, with some locations seeing sales fall by as much as 30%.
The tax increase has also widened the price gap between Michigan's licensed market and illicit sales, which continue to undercut legal operators. A gram of flower that costs $12-15 at a licensed dispensary can be found for $8-10 on the black market, industry sources say.
Industry Response
The Michigan Cannabis Industry Association has thrown its support behind Damoose's repeal effort, calling the tax "economically destructive" and warning that more closures are likely without legislative intervention.
"We're not asking for special treatment," said association director Robin Schneider. "We're asking for a tax structure that allows legal businesses to compete and survive."
Several dispensary owners have testified before state committees about the tax's impact. One Detroit-area operator reported laying off 12 employees and reducing hours at two locations to stay afloat.
But the proposal faces an uphill battle in Lansing. Revenue from cannabis taxes flows to schools, roads, and municipal governments—creating political resistance to any reduction. The state collected more than $290 million in cannabis tax revenue last year, with projections showing continued growth.
What's Next
Damoose plans to introduce repeal legislation when the state House reconvenes next month. He has secured at least eight co-sponsors from both parties, though passage remains uncertain given the budget implications.
Governor Gretchen Whitmer has not commented publicly on the proposal. Her office has previously defended the tax as necessary to fund public services and regulate the industry.
Some industry advocates are pushing for a compromise that would lower the tax rate rather than eliminate it entirely. A coalition of operators has proposed reducing the levy to 15% while maintaining existing excise and sales taxes.
The Cannabis Regulatory Agency is scheduled to release updated sales and revenue data next week, which could provide additional ammunition for either side of the debate. Industry observers expect the numbers to show continued sales declines and market contraction.
Meanwhile, operators say they're caught between impossible choices: absorb the tax hit and operate at a loss, pass costs to consumers and lose market share, or close their doors entirely. For some, the decision has already been made.
This article is based on original reporting by mjbizdaily.com.
