Can Cannabis Pay to “Fix the Damn Roads”? Michigan Lawmaker Seeks to Suspend 24% Tax

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Michigan state Rep. Jay DeBoyer announced plans on October 22 to suspend the state's 24% wholesale cannabis tax for 12 months, arguing it is generating tens of millions of dollars less than projected. The proposal is not yet law.

• Operators: The 24% tax, in effect since January 1, 2026, stacks on existing cannabis taxes and also applies to vertically integrated operators. Relief depends on a bill that has yet to be formally introduced, so current obligations stand.
• Investors: A suspension would interrupt a road-funding revenue stream, creating a fiscal trade-off for lawmakers. The article says evidence of closures, lost legal sales or illicit-market shift remains thin, and no detailed revenue reconciliation was provided.
• Do now: Keep filing and remitting the wholesale tax with the Michigan Department of Treasury as required, and track whether DeBoyer's bill is formally introduced and referred to a House committee.

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State Rep. Jay DeBoyer wants to pause Michigan’s 24% wholesale cannabis tax, arguing that the road-funding measure is falling short of revenue expectations while putting additional pressure on licensed operators.

Michigan’s controversial 24% wholesale cannabis tax could face a new legislative challenge less than a year after taking effect, with Republican state Rep. Jay DeBoyer announcing plans to suspend the levy for 12 months while lawmakers reassess its economic impact.

DeBoyer, who represents Michigan’s 63rd House District and is running for lieutenant governor on the Republican ticket, announced the proposal on October 22. His argument goes beyond the additional costs imposed on cannabis businesses: he contends that the tax is failing to deliver the revenue lawmakers expected while making it harder for licensed operators to compete.

The debate strikes at the heart of Gov. Gretchen Whitmer’s signature “Fix the Damn Roads” agenda, a slogan that helped define her gubernatorial campaign. Michigan has increasingly turned to cannabis tax revenue to support public spending, including infrastructure improvements. But DeBoyer’s proposal raises a fundamental economic question: Can the state generate more revenue from legal cannabis without undermining the businesses responsible for producing it?

A Road-Funding Tax Under Scrutiny

Michigan’s 24% wholesale marijuana tax took effect January 1, 2026, under Public Act 23 of 2025, part of a broader legislative effort to fund road construction and maintenance.

The tax applies to certain wholesale transfers of marijuana, including sales to licensed retailers. Vertically integrated businesses that cultivate or process cannabis for their own retail operations are also subject to the levy, using a statutory wholesale-price calculation.

Importantly, the tax was imposed in addition to Michigan’s existing cannabis taxes, rather than replacing them.

The revenue is primarily directed toward the state’s Neighborhood Road Fund, linking the financial performance of the regulated marijuana market to infrastructure spending.

But DeBoyer now argues that the policy was implemented without adequately addressing its administrative and economic consequences.

“The tax is generating tens of millions of dollars less in revenue than what was projected, and there’s no enforcement agency to collect it,” DeBoyer said in his October 22 announcement.

He also claimed that the additional burden is pushing business toward the illicit market, where sellers do not face the same licensing, testing, compliance, and tax obligations.

Those assertions are central to his case for suspending the tax, although the announcement did not provide a detailed revenue reconciliation or independent analysis establishing the extent of any resulting shift toward unlicensed sales.

A Republican Reconsiders a Tax He Initially Supported

DeBoyer’s position is particularly notable because he acknowledged supporting the broader road-funding legislation when it was adopted.

“I supported the original legislation at large for needed road funding, but I was always skeptical to impose a tax with no mechanism to collect it,” he said.

His proposed legislation would suspend the wholesale tax for 12 months, creating an opportunity to review its performance and determine whether the current structure should be maintained, modified, or replaced.

The proposal has not yet become law. DeBoyer’s October 22 announcement said the measure would be formally introduced and referred to a House committee.

The Economics of an Already Competitive Market

Michigan has developed one of the country’s most competitive legal cannabis markets, characterized by substantial product availability and intense price competition.

The state’s Cannabis Regulatory Agency publishes monthly data covering marijuana sales, average retail prices, and licensing activity. Those figures provide an important basis for assessing whether the wholesale tax is affecting market performance.

The economic concern is straightforward. A tax imposed at the wholesale level increases costs within the regulated supply chain. Depending on market conditions, that additional burden can be absorbed by cultivators and processors, passed along to retailers, reflected in consumer prices, or distributed across several participants.

For operators already competing on narrow margins, those choices can be consequential.

A vertically integrated company may have greater control over production and retail pricing, but it is not exempt from the wholesale tax simply because its products move between affiliated operations.

Independent cultivators, processors and retailers face a different challenge: negotiating prices and maintaining margins across multiple businesses while competing against larger integrated operators.

Whether the tax has significantly accelerated business closures, reduced legal sales, or expanded illicit-market activity remains a question requiring additional evidence. Nevertheless, DeBoyer’s proposal highlights the growing political attention surrounding the financial health of Michigan’s licensed cannabis businesses.

The Revenue Trade-Off

Suspending the tax would offer relief to businesses subject to the levy, but it would also interrupt a revenue stream designated for road funding.

That creates a difficult fiscal trade-off.

Michigan lawmakers would need to consider how much revenue a suspension would forgo, whether additional economic activity could offset some of those losses through other taxes, and how infrastructure commitments would be financed during the proposed pause.

There is also an administrative question embedded in DeBoyer’s criticism.

Public Act 23 assigns responsibility for administering the wholesale tax to the Michigan Department of Treasury and establishes requirements for filing returns and remitting payments.

Consequently, the law does identify a collecting authority, even though DeBoyer has questioned the effectiveness of its implementation and enforcement.

What Happens Next?

For now, DeBoyer’s announcement marks the beginning of a potential legislative effort rather than an immediate change in Michigan cannabis taxation.

The details of the proposed suspension, including its effective date, treatment of existing liabilities, and any replacement funding mechanism, will become clearer if legislation is formally introduced.

The debate also arrives at a politically significant moment, with DeBoyer campaigning for lieutenant governor in Michigan’s 2026 election.

For the cannabis industry, the larger issue extends beyond the state’s roads. Michigan’s experience could become another test of how far governments can increase taxes on regulated cannabis before the additional revenue comes at the expense of the businesses expected to produce it.

The intersection of cannabis taxation, business sustainability, and public policy will also be central to discussions at IgniteIt’s Cannabis Capital & Policy Summit in Washington, D.C., on November 18, where industry executives, investors, and policymakers will examine the financial and regulatory decisions shaping the next phase of the U.S. cannabis market.