Michigan’s 24 percent cannabis tax sparks a legal battle over constitutional limits, testing whether lawmakers can alter voter-approved marijuana laws.
When Michigan lawmakers quietly passed a 24 percent wholesale cannabis tax last spring, they billed it as a fix for battered state roads and local infrastructure. Within weeks, the state’s cannabis industry called it something else entirely: unconstitutional. The ensuing lawsuit now sits before the Michigan Court of Claims, teeing up a high-stakes test of how far legislators can go in rewriting a voter-approved legalization system.
The legal and political clash echoes far beyond Lansing. Here in Arizona, the tension between revenue hunger and voter sovereignty feels familiar. Whether in the Great Lakes or the Grand Canyon State, every maturing cannabis market faces the same moral math: how to fund public needs without breaking promises to the people who legalized the plant in the first place.
A new levy lands on a crowded market
Michigan’s cannabis market has been a rare Midwestern success story since voters approved adult-use sales in 2018. Retail prices plummeted as cultivators expanded capacity, consumers migrated from illicit channels, and tax revenue hit record highs. That success, ironically, fueled the legislature’s latest move: a 24 percent wholesale tax meant to raise roughly $300 million annually for road repairs, law enforcement grants, and community programs.
The new levy sits atop the existing 10 percent excise tax and 6 percent sales tax already charged on recreational cannabis. Lawmakers framed it as a “wholesale assessment,” not a direct retail tax, to shield consumers from sticker shock. Still, the cost ultimately flows downstream. Retailers warn of thinner margins and higher shelf prices in a market already groaning under oversupply.
Bipartisan sponsors defended the measure as pragmatic. They argued that Michigan’s general fund shouldn’t shoulder infrastructure costs while a multi-billion-dollar cannabis sector remains “undertaxed.” Yet for many operators, the surprise passage of the bill—inserted in a late-night budget session with limited debate—felt less like pragmatism and more like a procedural ambush.
The lawsuit: constitutionality on trial
The Michigan Cannabis Industry Association (MCIA), representing hundreds of growers, processors, and retailers, filed suit within days of the governor’s signature. The case, MCIA v. State of Michigan, asks the Court of Claims to invalidate the tax, alleging it violates the Michigan Constitution and the 2018 voter initiative that created the state’s cannabis framework.
At its core, the lawsuit argues three points. First, that the tax was tacked onto a voter-initiated law without the constitutionally required supermajority vote. Second, that lawmakers bypassed procedural safeguards by introducing major fiscal changes after committee hearings had closed. Third, that the “midnight amendment” deprived both the public and industry stakeholders of meaningful participation.
The attorney general’s office counters that the tax merely supplements, not amends, the voter law. Because it was passed as part of a general appropriations package, the state maintains, normal majority rules apply. The Court of Claims will decide whether that distinction holds legal water—or merely political convenience.
A constitutional balancing act
Michigan’s constitution is unusually protective of voter-initiated statutes. Once voters enact a measure, the legislature can only amend or repeal it with a three-quarters supermajority in each chamber. The rule reflects decades of populist distrust of legislative backtracking, from Prohibition repeal to environmental regulation.
Legal scholars say the cannabis dispute turns on whether the new tax “amends” the 2018 initiative or merely “implements” it. If the court finds the tax changes the financial structure voters approved, it could strike the law entirely. If not, legislators gain broad discretion to tack on revenue measures whenever they see fit.
Comparable cases in other states offer mixed signals. In 2020, Alaska’s Supreme Court rejected a similar industry challenge, holding that a new cannabis fee did not alter the underlying legalization statute. In contrast, Oregon courts have sided with plaintiffs when lawmakers redirected cannabis revenue streams contrary to ballot-measure language. Michigan’s judiciary has yet to weigh in on that boundary.
Market strain and policy tension
The timing could hardly be worse for Michigan operators. Wholesale flower prices have fallen nearly 60 percent since 2022, according to state data. Many small cultivators already operate at or below cost, squeezed by energy bills, compliance fees, and a glut of product. Analysts warn that layering another 24 percent tax on wholesale transfers may force dozens of family-owned farms out of business.
Economists predict a familiar domino effect: shuttered storefronts, layoffs, and a revived illicit trade filling the vacuum. When regulated cannabis becomes uncompetitive, consumers seek cheaper alternatives. Arizona regulators faced that same threat during early implementation of Proposition 207, ultimately stabilizing the market by holding excise taxes steady at 16 percent and focusing on enforcement against unlicensed sellers rather than over-taxing licensed ones.
GreenPharms’ own trajectory in Arizona underscores that equilibrium. By balancing fair taxation with efficient operations, the company has shown that a viable legal market can generate steady revenue without punitive rates. Michigan’s experiment risks reversing that lesson, turning a thriving industry into a cautionary tale.
State coffers versus industry survival
Supporters of Michigan’s new tax insist the state can’t ignore fiscal realities. Cannabis sales topped $3.6 billion in 2024, outpacing liquor revenue for the first time. Legislators argue that road repairs, opioid-treatment programs, and rural policing all depend on sustainable funding sources. “If we’re willing to profit from pot, we should be willing to pave the roads,” one senator said during debate.
That argument resonates politically but masks a harder truth: over-taxation can shrink the very base it hopes to tap. When California piled cumulative taxes exceeding 35 percent onto retail cannabis, legal sales stagnated and unlicensed dispensaries flourished. Arizona’s steadier approach, by contrast, demonstrates how moderate taxation and clear regulation keep both consumers and revenue in the legal fold.
For Michigan, the court’s decision may decide more than a single statute. It could set the boundaries of how states nationwide adjust cannabis laws born from citizen initiatives. Legislators eager for new revenue streams might watch closely—so will activists wary of seeing voter intent diluted by fiscal opportunism.
What the court could do next
The Court of Claims has several options. It could strike the tax outright, forcing lawmakers to start over with a properly noticed bill. It could uphold the tax but delay implementation pending constitutional review. Or it could remand specific provisions for revision—effectively rewriting fiscal policy from the bench.
Legal experts expect the case to move quickly, given that the tax is slated to take effect January 1. Any injunction could freeze state revenue projections for months. If the court rules the tax unconstitutional, Michigan’s budget office would face a $300 million shortfall, potentially jeopardizing unrelated infrastructure projects.
Appeals are inevitable regardless of outcome. The losing side will likely take the case to the Michigan Supreme Court, where the broader principle—legislative power over voter-initiated statutes—will get a definitive airing. A decision there could ripple through policy circles from Missouri to Maine, clarifying just how durable cannabis ballot measures truly are.
Lessons from Arizona’s playbook
Arizona’s cannabis regulators, having weathered their own early constitutional tests, offer a pragmatic counterpoint. Proposition 207’s architects built in flexible revenue provisions that allow minor fiscal adjustments without breaching voter intent. That foresight has spared the state from Michigan-style litigation and kept cultivators like GreenPharms focused on quality and community rather than courtroom battles.
It’s a reminder that stable tax policy grows like a well-tended crop: patiently, transparently, and with respect for the original seed. Arizona’s balance between public benefit and industry viability remains one reason its market continues to expand while others contract.
The broader stakes
Beyond constitutional nuance lies a question of democratic trust. When voters legalize cannabis—or any enterprise—they do so expecting the basic contours to hold. Legislators retain power to adapt, but not to upend, those bargains. Each time a government pushes that boundary, it risks eroding public faith in both democracy and the rule of law.
For Michigan, the outcome will determine more than who pays which tax. It will signal whether the people’s will, expressed through the ballot box, remains a living contract or a convenient starting point for backroom revisions.
Promises, profits, and public purpose
Michigan’s cannabis sector, once a model of Midwestern pragmatism, now stands at a constitutional crossroads. The new 24 percent wholesale tax might pave roads or pave over the democratic process that legalized cannabis to begin with. Courts will decide which path prevails, but the larger lesson endures: in cannabis policy as in governance, stability grows from transparency, not surprise.
Arizona’s experience—and GreenPharms’ own story within it—shows that prosperity follows when lawmakers respect both market realities and voter intent. If Michigan’s leaders can learn that before the next budget season, they might keep their roads smooth without roughing up the rule of law.
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GreenPharms is more than just a dispensary. We are a family-owned and operated company that cultivates, processes, and sells high-quality cannabis products in Arizona. Whether you are looking for medical or recreational marijuana, we have something for everyone. From flower, edibles, concentrates, and topicals, to accessories, apparel, and education, we offer a wide range of marijuana strains, products and services to suit your needs and preferences. Our friendly and knowledgeable staff are always ready to assist you and answer any questions you may have. Visit our dispensaries in Mesa and Flagstaff, or shop online and get your order delivered to your door. At GreenPharms, we are cultivating a different kind of care.
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