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Governor Gretchen Whitmer’s signature was barely dry and the new budget bills filed with the Office of the Great Seal before the state’s marijuana (or marihuana) industry was in court challenging a major revenue-raiser – the new wholesale tax on recreational pot.
This (unsurprising) development marred the victory lap after Whitmer signed the new $80 billion state budget into law on Tuesday, marking the end of months of tense negotiations, missed deadlines, and behind-the-scenes wrangling in politically divided Lansing.
Critics of the new tax who filed suit argue that it violates the Michigan Constitution.
That’s because voter-approved initiatives - like the 2018 marijuana legalization law - can only be amended with a 3/4 majority vote in both the state House and Senate, or by another vote of the people. This new law received neither.
There are now at least two lawsuits filed in the Michigan Court of Claims arguing that the new 24% wholesale tax is illegal because there is no provision allowing it in the Michigan Regulation and Taxation of Marihuana Act. The 2018 voter-approved initiative did create a 10% excise tax that is paid directly by consumers. But an attorney for one of the marijuana companies told Rick the state can’t simply add another tax on top of that.
“It’s just unconstitutional because what they’re doing is going around what the public wanted, what the public mandated in the ballot initiative,” said Stephen Crane, the attorney for Holistic Research Group. “So, what we’re really asking the Court of Claims to do is find the law unconstitutional before it becomes effective.”
The Holistic Research Group complaint said the state’s action “fundamentally alters the marihuana law" and called it “a punitive excise tax on marihuana licensees.”
The Michigan Cannabis Industry Association has also filed a challenge to the new tax in the Michigan Court of Claims.
Retired constitutional lawyer Robert LaBrant joined the It’s Just Politics podcast this week to help explain the legal arguments both the state and the marijuana industry could make, calling the questions “an interesting constitutional issue that deserves to be litigated.”
The state has not specifically outlined its reasoning behind why it thinks the wholesale tax is legal. We’ll be looking for its reply brief to the lawsuit due October 28 for those legal arguments.
But Governor Whitmer told The Detroit Free Press at a public appearance Wednesday that she expects the tax will be upheld.
“We are confident in the legality of the actions that were taken to write this year’s budget, as we are every single year,” she said. “I wouldn’t put my name on something if we weren’t confident it would be upheld.”
The stakes are high (ha). The tax will make up an estimated $420 million of the new $2 billion plan to fund state and local roads.
One of the state’s arguments could be that the wholesale tax is primarily a revenue source for roads as opposed to a marijuana regulation. Another would be whether the tax fundamentally alters the purpose of the initiative.
Critics of the tax contend higher legal marijuana prices will tamp down legal sales, thus reducing revenue as marijuana buyers turn to the black market. One of the original arguments for the initiative was affordable, legal marijuana products would scale down illegal sales.
“The question is, and I think this is something for the courts to determine, will this essentially encourage the sale of marijuana for recreational purposes on the black market,” LaBrant told us. “And I think that’s probably perhaps one of the strongest arguments as to why this is a substantive change.”
So, now these questions are up to the courts.
It is very likely that whatever the Court of Claims rules in these (and perhaps additional) cases will be appealed and the final arbiter will be the Michigan Supreme Court. Absent court action, the new tax takes effect January 1 and there will be a lot of pressure to have these cases wrapped up by the New Year.
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Have questions about Michigan politics? Or, just want to let us know what you want more of (less of?) in the newsletter? We always want to hear from you! Shoot us an email at politics@michiganpublic.org!
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Governor Whitmer signs Michigan’s new $80 billion budget, but a new 24% marijuana tax to fund roads is already in legal trouble. Hear from Michigan Budget Director Jen Flood & legal expert Robert LaBrant.
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What we’re talking about at the dinner table
AG on NG: Michigan Attorney General Dana Nessel told our colleague Colin Jackson this week that she thinks it’s “only a matter of time” before President Donald Trump sends National Guard troops to Michigan. “Nessel, a Democrat, said her staff is already working, as best they can, on possible legal filings if soldiers get sent here,” Jackson reports. “In general, the governor would have to authorize the use of the Michigan National Guard. But the Trump administration is testing that legal convention.” And, Jackson reminds us, “Vice President JD Vance suggested sending the National Guard to Detroit during a Michigan appearance last month. And, at a Michigan Republican Party conference on Mackinac Island last month, three candidates told Bridge Michigan they’d support federal intervention in Michigan’s largest city.” It was exactly a year ago today that then-presidential candidate Trump delivered a speech to the Detroit Economic Club, telling the audience that if then-Vice President Kamala Harris was elected, “our whole country will end up being like Detroit if she’s your president. You’re going to have a mess on your hands.” This week, Detroit city officials announced violent crime in the city continues to decline.
The “damn” swearing: Speaking of road funding, Governor Whitmer can now say she’s fulfilled her until-now-elusive campaign promise to “fix the damn roads.” (We’re not going to argue right now about whether this $2 billion is actually enough). Back in 2018 when the slogan first gained traction, there were worries about her use of the word “damn.” What quaint times those were. The Atlantic this week takes a look at all the cursing in current American politics with the piece Politicians Aren’t Cool Enough to Curse This Much. Take a minute to read when you have some $#%! time.
Join us!: There’s a new state budget, legal questions surrounding the new wholesale tax on marijuana, and a historic Michigan election coming up quickly. We’ll dig into it all - and more - at next week’s It’s Just Politics Issues & Ale in Grand Rapids. The Detroit News’ Chad Livengood and Bridge Michigan’s Lauren Gibbons will join us next Wednesday, October 15th, at 7:00 p.m. at the Grand Rapids Downtown Market to talk all about Michigan politics - and take your questions live! You can come in person or join virtually! As always, the event is free (we just ask that you register to attend ahead of time). Meantime, we’re hoping to spend the first calm upcoming weekend in quite a few weeks celebrating our five-year wedding anniversary. (For those new to the newsletter, we’re not just co-hosts of It’s Just Politics, we’re co-hosts in life, too).
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Yours in political nerdiness,
Rick Pluta & Zoe Clark
Co-hosts, It’s Just Politics
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IJP ON THE ROAD:
Rick appeared this week on Michigan Public Television’s “Off The Record,” where the panel talked about the new state budget and the marijuana tax. Show guest Republican State Representative Bryan Posthumus said he would like to see an interstate compact where participants would pledge to forego big cash incentives as a business attraction tool.
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Join Michigan Public’s It's Just Politics team Zoe Clark and Rick Pluta and a panel of guests, as they dig into what’s happening at the state capitol and take your questions about Michigan politics.
