Michigan’s roads have long been the butt of jokes and the source of frustration for drivers dodging potholes and navigating crumbling highways. But this year, state lawmakers and Governor Gretchen Whitmer are betting on a bold new fix: taxing marijuana at the wholesale level. On October 7, 2025, Governor Whitmer signed into law a 24% wholesale tax on marijuana sales between producers and dispensaries, a move that instantly ignited controversy and set the stage for a major legal battle. The new tax, set to take effect January 1, 2026, is projected to raise an estimated $420 million annually—money that will be funneled directly into repairing Michigan’s battered roadways.
The tax is part of Whitmer’s long-standing campaign promise to “fix the damn roads,” a phrase that has become synonymous with her administration since she first took office. According to The Detroit News, Whitmer expressed optimism about the bipartisan compromise that ended months of budget gridlock, saying, “Amidst so much uncertainty caused by a chaotic tariff strategy and a national government shutdown, Michigan is showing everyone how to get things done. In the weeks and months ahead, we will build on this momentum and come together on commonsense tools to create and retain good-paying jobs.”
But not everyone is celebrating. Just hours after the ink dried on the new law, the Michigan Cannabis Industry Association (MCIA), which represents approximately 400 licensed marijuana businesses, filed a lawsuit in the Michigan Court of Claims. The association’s attorneys argue that the new tax violates the state constitution because it effectively amends the 2018 ballot initiative—the Michigan Regulation and Taxation of Marihuana Act (MRTMA)—without the required three-fourths supermajority in the Legislature. The MRTMA, approved by voters, legalized recreational marijuana and established a 10% excise tax on retail sales, explicitly laying out the framework for how cannabis would be taxed in the state.
“The lawsuit details how the last-minute, late-night process occurred in violation of a range of other constitutional provisions,” said Douglas Mains, one of the lawyers representing the MCIA, as reported by The Detroit News. “The association is asking the court to strike the tax in its entirety.” The MCIA’s legal team, drawing on the language of the 2018 law, contends that it is the “exclusive mechanism for imposing excise taxes” on cannabis products in Michigan. In their view, the new Comprehensive Road Funding Tax Act (CRFTA)—the vehicle for the wholesale tax—can’t be separated from the MRTMA, making the supermajority requirement unavoidable.
It’s not just a matter of legal technicalities. The legislative math is crystal clear: in the Michigan Senate, only 19 of 37 lawmakers supported the tax, far short of the three-fourths threshold. Supporters, like Representative Alabas Farhat, D-Dearborn, maintain that the new tax was not a direct amendment of the voter-approved law and thus did not require supermajority backing. “We have some great lawyers, some fabulous lawyers… They’ve all looked at this and they’ve made it clear that this will withstand a legal challenge, being that it’s at the first point of sale and not at the retail side,” Farhat said last month.
The stakes are high for Michigan’s cannabis industry, which saw recreational marijuana retail sales reach about $3.2 billion in 2024, according to data from the Cannabis Regulatory Agency. Industry leaders warn that the new tax could have far-reaching consequences. Stuart Carter, founder of the Detroit Cannabis Industry Association, didn’t mince words, calling the measure a “slap in the face” and criticizing the speed with which it was pushed through the Legislature. Fiscal analysts at the Michigan Senate Fiscal Agency predict the tax could cause a 14.4% drop in marijuana sales, with many fearing it will push consumers toward the black market in search of cheaper, untaxed products.
“This massive tax increase is really going to hurt the legal market in Michigan. The higher the tax, the greater the incentive for consumers to seek cheaper, unregulated product,” said Adam Hoffer, director of excise tax policy at the Tax Foundation, in an interview with the Associated Press.
Consumers, meanwhile, will continue to pay the existing 10% excise tax on retail marijuana sales, plus Michigan’s 6% sales tax, making the state’s cannabis taxes among the highest in the nation. The new 24% levy applies only to transactions between growers, processors, and dispensaries—before products ever reach store shelves. For comparison, other states like Minnesota, Maryland, and Maine have also raised marijuana taxes this year, but Michigan’s move stands out for its scale and its explicit connection to infrastructure funding.
The road funding plan itself is ambitious. Whitmer’s $1.8 billion initiative will direct about $1 billion of the budget toward local road and bridge projects, with the remainder focused on major highways. In a significant shift, the plan also redirects all taxes collected at the gas pump—previously earmarked for schools—toward road construction and maintenance. The overall state budget for 2026 totals $81 billion, reflecting the high stakes and political wrangling that nearly led to a government shutdown when lawmakers missed the October 1 deadline to pass a budget. Democrats currently control the Senate, while Republicans hold the House, making bipartisan compromise essential.
Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure and Transportation Association, sees the marijuana tax as a creative solution to a perennial problem. “We think this is a big step in the right direction,” he told Newsweek. “It’s a nontraditional method, but lawmakers recognized the urgency of finalizing a plan.”
Yet critics remain skeptical. Opponents argue that the tax could stifle Michigan’s burgeoning cannabis industry, which has been a bright spot in the state’s economy, and that the move sets a troubling precedent for legislative overrides of voter-approved initiatives. The MCIA’s lawsuit, authored by attorneys from Honigman and Dykema Gossett, warns that allowing the tax to stand would undermine “constitutional safeguards that protect initiated laws from legislative interference.” The case could ultimately end up before the Michigan Supreme Court, where justices would be asked to decide whether the Legislature overstepped its bounds.
For now, the battle lines are drawn. Supporters tout the tax as a necessary, if unconventional, way to address Michigan’s dire infrastructure needs. Critics see it as a rushed, possibly unconstitutional move that threatens both the legal cannabis market and the principle of direct democracy. As the legal fight unfolds, one thing is certain: the outcome will shape not just the future of Michigan’s roads, but the state’s approach to marijuana policy and the power of the ballot box itself.
With billions of dollars, thousands of jobs, and the integrity of Michigan’s political process on the line, all eyes are on Lansing as this high-stakes showdown moves from the Legislature to the courts.
