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Michigan new pot tax still a go after judge denies injunction to block it

Michigan has some of the lowest marijuana prices in the country, but would have some of the highest taxes after a new road funding law goes into effect. Photo credit: Josh Boland/Bridge Michigan.

Editor note: This story was originally published by Bridge Michigan��(bridgemi.com), a nonprofit and nonpartisan news organization. To get regular coverage from Bridge Michigan, sign up for a free Bridge Michigan newsletter ��().” 

by Simon D. Schuster, Bridge Michigan

A Court of Claims judge has declined to block a 24% wholesale tax on Michigan marijuana less than a month before it scheduled to go into effect but allowed the cannabis industry challenge to the tax to proceed.

Industry groups sued the state over the new tax, which was part of a road funding deal at the center of budget negotiations in September.

The Michigan Cannabis Industry Association alleged the new tax is unconstitutional because it improperly alters the 2018 ballot measure that legalized the drug for Michigan adults.

Amending voter-approved measures like Michigan marijuana law requires a two-thirds supermajority of legislators, which the new tax — called the Comprehensive Road Funding Tax Act — did not receive.

Lawyers for the industry group argued the new tax indirectly amended the ballot measure, something that also not allowed under the state constitution title-object clause, which requires all laws to be amended directly.

Judge Sima Patel disagreed. She wrote the new law was “another tax,” not an amendment to the original ballot proposal.

“Nothing in (the legalization law) requires that ‘all other taxes’ imposed on marijuana be effectuated by an amendment to (that law),” Patel said in the opinion.

At the same time, Patel denied the state request to throw out the lawsuit. Whether the new tax “interferes and conflicts with the purposes of” the state marijuana law is still a question to be decided.

The head of the Michigan Cannabis Industry Association, Robin Schneider, helped draft the legalization law and wrote in an affidavit that the tax rate was made deliberately low — 10% — to encourage a shift away from illicit sources. She argued another tax would reduce that success.

Michigan has the second-lowest marijuana prices of any state, behind only Oregon, according to research firm Headset. The new tax would make Michigan taxes on marijuana some of the highest, however, when they go into effect Jan. 1.

Patel wants to see evidence submitted to “consider the intentions of the (legalization law) drafters and the impact of the new wholesale excise tax on the purposes of (that law).”

The new tax is at the center of a plan to generate billions of dollars in new road funding. The nonpartisan Citizens Research Council estimated the tax would bring in about $417 million next year, about a quarter of all the revenue used in the new road funding plan.

The lack of a quick resolution in the case means uncertainty will continue until the foreseeable future, something council researcher Eric Dennis said in a presentation about the road funding package last week “is actually a big deal to road agencies.

“Construction projects are planned years in advance,” Dennis said. “It’s going to cause some headaches for a lot of people.”

Once the new tax goes into effect, it not clear when local road agencies will be able to access the money it raises.

“This revenue is likely to either not be collected or remain in an escrow account until the legal challenge has been entirely resolved,” the council wrote in their report.

Lawmakers, meanwhile, responded to complaints from businesses about the competitive industry by considering a sweeping plan that would Michigan issues, essentially blocking new would-be entrants into the market.

This first appeared on and is republished here under a .

by Sara Swanson

Sara Swanson is an editor, writer and a founder of the Manchester Mirror.