• Michigan’s marijuana industry already was contracting amid oversupply, steep competition that drove down prices, and legalization in other states
  • A new 24% wholesale tax on the drug could accelerate consolidation, industry experts say
  • The tax raises money to fund road repairs

In December, 62 people lost their jobs when a marijuana manufacturing plant in Webberville (population roughly 1,400) closed. 

The plant’s leaders blamed a cannabis market contracting amid oversupply that’s driving down prices and a new 24% state wholesale tax. Researchers and industry insiders say that tax could accelerate consolidation in the industry, which would hit rural communities especially hard.

“In small towns, the impact of a business opening or closing is really acute, because it’s a really big swing in revenue when there’s a change,” said Stephanie Leiser, the director of the Center for Local, State and Urban Policy at the University of Michigan. “If you have 30 or 40 (marijuana business) licenses, losing one license is not a big deal. But if you only have five, losing one is a pretty big deal.”

More than 800 cannabis retail stores sell about $3 billion a year in Michigan. But the industry was already facing market challenges from legalization in nearby states and high in-state competition when the new tax took effect Jan. 1. The first tax payment was due April 20. 

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The tax, passed as part of a road funding deal, is levied on top of a 10% excise tax and 6% sales tax already levied on the drug. The new tax is being challenged by two lawsuits filed by the Michigan Cannabis Industry Association. 

Proprietors and experts think the new tax will expedite contraction and consolidation in the market, forcing some businesses to reduce profit margins or close all together. 

“A lot of them are operating on very thin profit margins, and I could certainly see a scenario where this tax forces some people out of business,” said Bill Knudson, a professor for Michigan State University’s Department of Agricultural, Food, and Resource Economics

“Michigan is dealing with oversupply and a very open licensing structure, which has already compressed margins across the industry,” said Derek Norman, the founder of Humblebee, a Frederic-based company that makes live resin products. “So this isn’t happening in a vacuum. It’s hitting operators at a point when many are already under significant financial pressure.”

But backers of the tax say market saturation is driving some businesses out, not the new tax. 

State Sen. Ed McBroom, R-Norway, who represents most of the Upper Peninsula and voted in favor of the new tax, said the new tax puts Michigan in the middle of the pack in terms of states’ cannabis tax rates.

“Everyone knew that that kind of consolidation was bound to happen since the Michigan market is so saturated,” he said.

He added: “I don’t think we are better off as a people for having more addictive substances available for less money.”

Whatever the reason for the industry’s troubles, it will likely disproportionately affect the rural communities who were among the earliest to allow marijuana in their borders, experts and insiders say.

In 2020, as few as 66 cities, townships and villages had voted to allow marijuana in their communities, compared to 238 in 2025. According to the Michigan Department of Treasury’s monthly cannabis reports and MI Community Financial Dashboard population data, two-thirds of those early municipalities had populations less than 10,000 and contained nearly half of the retail licenses in the state. 

Ironwood (population roughly 5,000), near the border of Wisconsin, didn’t have any retail stores until 2022. In the years since, it has received more than $783,000 in marijuana tax revenue sharing from the state, growing its general fund 66%

“I have to admit I was concerned about the (new) tax when I heard about it,” Tom Bergman, Ironwood community development director, said.

Mike DiLaura, the chief corporate officer at House of Dank who also sits on the Michigan Cannabis Industry Association board, said his company has 15 stores across Michigan, including some in more rural areas such as Traverse City and New Buffalo. He said that investment — which often included buying and remodeling vacant properties — will benefit those towns, even if some stores ultimately close.

“Obviously, some of these stores and grows are not going to make it in these small communities,” said DiLaura. “But that failure still brought investment and economic activity.”

Iosco County’s Baldwin Township (population roughly 1,600) in northeast Michigan has received nearly $900,000 from the state’s annual marijuana tax distributions since its first cannabis store opened in 2020. That boomed its general fund by 78%. That money largely went toward capital projects, such as fixing a bike path that was started in the 1990s to connect Tawas Point State Park to the Iron Belle Trail.

“Being able to fix the bike path without raising taxes was pretty beneficial to our community,” said Christopher Martin, Baldwin Township supervisor.

At one point, the township had five dispensaries.

Now, it has two.

This reporting is made possible by the Northern Michigan Journalism Collaborative, led by Bridge Michigan and Interlochen Public Radio, and funded by Press Forward Northern Michigan.

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