Michigan & Sustainable Economics

Written By: Hirsh Jain | Director of Market Intelligence, Verdant Strategies
October 7, 2025

Last week, Michigan lawmakers passed House Bill 4951, enacting a devastating 24% wholesale excise tax on cannabis beginning January 1, 2026. When combined with Michigan's existing 10% retail excise tax and 6% general sales tax, this bill increases the total effective tax burden on Michigan cannabis businesses to an astounding 50%. This tax increase places Michigan among the most punitive cannabis tax regimes in the nation, and will predictably push consumers back toward the illicit cannabis market in that state. For Michigan cannabis businesses that already operate on razor-thin margins due to strict regulatory burdens and federal tax constraints, this change in taxation will be nothing short of catastrophic.

Many operators - particularly independent growers, processors, and retailers - will find it extremely difficult, if not impossible, to absorb the added tax burden. Regrettably, we at Verdant Strategies expect a wave of cannabis business closures, consolidations, and job losses to follow in Michigan. In short, this change could represent an extinction event for large swaths of Michigan’s licensed cannabis sector.

Unfortunately, Michigan is not alone in its pursuit of misguided tax policies. Across the country, we are witnessing a clear trend of states treating legal cannabis as a “piggy bank” to plug state budget gaps. Maryland raised its cannabis sales tax from 9% to 12% in July 2025. Around the same time, Minnesota increased its cannabis excise tax from 10% to 15%, following political pressure to raise revenue. New Jersey is similarly considering additional cannabis tax increases in 2026. Even in states where the tax increases are not as severe as Michigan’s, they exacerbate already high effective tax burdens and threaten the survival of legal operators.

Verdant Strategies strongly disagrees with this punitive approach to cannabis tax policy being adopted across the country. We believe cannabis must be regulated and taxed in a way that supports sustainable economics. Still, these tax changes will force operators to rethink fundamental elements of their business in order to survive. Verdant stands prepared to support cannabis operators navigating these turbulent policy shifts with the following suggested strategies:

• Cash-on-delivery implications and liquidity planning. We model worst-case and intermediate scenarios to stress-test cash flow, working capital needs, and payment cycles under increased tax burdens. We help clients introduce liquidity cushions, payment timing strategies, and hedging mechanisms to survive the transition.
• Restructuring or vertical integration strategies. In markets with stacked taxation, vertically integrating production, processing, or retail can internalize margins and reduce inter-entity transfer costs. We advise on M&A, joint ventures, contract restructuring, and operational redesign to capture value across the supply chain.
• Policy advocacy and coalition-building efforts. We assist clients in organizing effectively at the state and local levels by preparing economic impact studies, aligning with broader industry coalitions, developing legislative messaging, and engaging regulators and legislators.
• Tax and compliance risk mitigation. Our team ensures correct tax treatment across hierarchies, and provides strategies to minimize inadvertent overpayment or penalties.

These services are imperative in an environment where tax policy can make or break a license holder’s future. We believe that as states double down on cannabis tax hikes, the operators who survive will be those who adapt quickly, manage risk smartly, and engage in proactive policy formation. 

Verdant Strategies is committed to standing with and supporting our clients across the country, to help ensure their continued survival in the face of these challenges.