The state of Michigan will see a multimillion-dollar pot industry from the onset of legal recreational cannabis, according to data released by the Coalition to Regulate Marijuana Like Alcohol. The group is leading the campaign to pass Proposal 1, an adult-use cannabis legalization initiative that will be decided by Michigan voters in this November’s election.
Under Proposal 1, the possession and consumption of marijuana would be legal for all Michigan adults 21 and older. The measure also creates a legal framework for commercial cannabis businesses and sets a 10 percent excise tax on recreational retail sales. All cannabis sales would be subject to the state’s six percent sales tax.
The Coalition to Regulate Marijuana Like Alcohol commissioned VS Strategies, a Colorado cannabis consulting firm, to develop sales and tax revenue projections if Proposal 1 is successful. The company based its predictions on data that showed nearly one million Michigan residents had consumed cannabis in the previous month and could be expected to buy product regularly.
Andrew Livingston, an economist and policy analyst with VS Strategies, projects that Michigan’s legal marijuana market will reach maturity by 2023, with nearly $1.5 billion in combined medical and adult-use sales annually. After that, the market would contract slightly as “competition slowly brings down prices,” said Livingston.
Revenue for State and Local Governments
VS Strategies also made projections on the impact the sale of legal recreational cannabis will have on state tax revenues.
“We’re estimating $520 million in taxes from 2020-2024,” said Livingston. “By 2023, Michigan will reach maturity with sales of just under $1.5 billion.”
If Proposal 1 passes, the revenue generated by the 10 percent excise tax will be divided between roads (35 percent), schools (35 percent) and local governments with marijuana businesses within their jurisdictions (15 percent each to counties and municipalities). Sales tax revenue will primarily support Michigan’s School Aid Fund.
Josh Hovey, a spokesperson for the Coalition to Regulate Marijuana Like Alcohol, said in a press release that cannabis tax revenues will be used to pay for repairs to neglected state infrastructure.
“Roads, schools and local governments have been under-funded in Michigan for years,” said Hovey. “By voting yes on Proposal 1, we will generate hundreds of millions in new revenue for these vital needs and improve our state.”
Hovey also noted that the state will realize cost savings from the legalization of cannabis.
“In addition to generating new tax dollars, we will also save millions of dollars each year by ending the failure of marijuana prohibition,” Hovey said.
Prohibitionists Dismiss Impact of Cannabis Taxes
Scott Greenlee of Healthy and Productive Michigan, a group that opposes Proposal 1, said that the taxes generated by cannabis sales will not be a significant source of revenue for a state with an annual operating budget of nearly $57 billion.
“Anybody who thinks economics in this state will improve because of this proposal is sadly mistaken,” said Greenlee. “There’s a very small impact.”
But Hovey said cannabis taxes were not intended to solve all of the state’s budget woes.
“We’ve never said that this initiative is going to solve all of Michigan’s funding problems,” Hovey said. “We can only direct that funding where we believe it’s needed and the majority of residents I think would agree that our roads desperately need more revenue.”
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