A new proposal in the Michigan Legislature is drawing sharp criticism from cannabis industry leaders and social equity advocates. House Bill 4122, introduced by Rep. Cynthia Neeley (D-Flint), seeks to impose a 32% wholesale excise tax on all adult-use cannabis products—one of the steepest proposed taxes on cannabis in the country. The revenue would be directed toward funding local police departments and public safety initiatives.
The bill aims to bolster law enforcement budgets across the state by taxing cannabis products at the wholesale level—before they even reach dispensary shelves. Currently, Michigan levies a 10% excise tax at the retail level, plus a 6% sales tax. The new 32% wholesale tax would be added on top of those existing rates.
According to the bill’s text, the proposed revenue would be used to support municipalities in hiring and retaining police officers, upgrading equipment, enhancing emergency response efforts, and investing in community-based safety programs. Rep. Neeley, who previously served on Flint’s city council, has said the measure is a response to increasing public concerns about underfunded police departments, especially in economically struggling areas.
“This legislation ensures that as the cannabis industry continues to thrive, that success is also supporting safe neighborhoods,” Neeley said in a March 14 statement. “Communities like mine have felt the impact of rising crime and short-staffed departments. It’s time we reinvest cannabis revenue where it’s needed most—into public safety.”
But cannabis industry stakeholders say the proposed tax is not only excessive, it’s dangerous.
Robin Schneider, executive director of the Michigan Cannabis Industry Association (MCIA), called the tax “devastating,” warning it could destroy Michigan’s regulated cannabis market by making legal products unaffordable and uncompetitive.
“A 32% wholesale tax would lead to dramatic price increases for consumers, sending people back to the unregulated and untaxed illicit market,” Schneider told Crain’s Detroit Business. “We support safe communities, but this bill would crush small cannabis businesses and undo the success of Michigan’s legal system.”
Michigan’s adult-use cannabis market has rapidly grown since legalization in 2018. In 2024, the state reported over $3 billion in legal cannabis sales, making it the second-largest market in the U.S. after California. Already, more than $290 million in cannabis tax revenue has been allocated to local governments, schools, and road infrastructure, according to the Michigan Cannabis Regulatory Agency.
Critics of HB 4122 also argue the bill conflicts with the spirit of Proposal 1, passed by voters in 2018, which created a legal cannabis market intended to promote equity, reduce criminalization, and replace the illicit market.
“This tax proposal risks making cannabis a luxury product, inaccessible to the very communities that have been disproportionately harmed by prohibition,” said Rick Thompson, executive director of NORML of Michigan.
The bill has been referred to the House Tax Policy Committee, where it faces an uphill battle amid growing opposition from industry groups, patient advocates, and social justice organizations.
If passed, Michigan would become the only state in the U.S. with both a wholesale tax of this magnitude and a retail excise tax on recreational cannabis.