Anderson Economic Group Work

Tax Note On Marijuana Tax Revenues Under Michigan’s Proposal 18-1 Released

EAST LANSING, MI—October 25, 2018—Anderson Economic Group’s Tax Revenues from Legalizing Recreational Marijuana Under Michigan’s Proposal 18-1 evaluates the net effect of legalizing recreational marijuana on marijuana-related tax collections. If passed on November 6, Proposal 18-1 would generate between $81 million and $175 million in additional sales and excise tax revenues in 2023, which is when the market would likely reach maturity. While tax collections on recreational marijuana would increase by at least $127 million, this would be offset by reductions of $31 million in medical marijuana excise tax revenues and cannibalization of $16 million in sales tax revenues from medical marijuana and other sources.

The Tax Note also includes a breakdown of how these tax collections are distributed to public entities, such as different state government funds, schools, municipalities, and counties. In 2023, the School Aid Fund would receive at least $54 million in additional funding, Michigan’s roads and bridges could receive an extra $27 million, and local governments would receive $10 million under a low-growth scenario. However, state restricted funds would see a loss of about $13 million.

Source: Anderson Economic Group analysis using base data from AEG AndCan Index and Proposal 18-1

“Legalizing recreational cannabis would increase annual sales and excise tax collections to the tune of over $80 million under a mature market,” said Traci Giroux, co-author of the Tax Note and Consultant at Anderson Economic Group. “Schools, roads, and local governments in aggregate would receive this funding under Proposal 18-1.”

Anderson Economic Group’s Tax Note is the first assessment of Proposal 18-1 that does all of the following:

  • Accounts for cannibalization of medical marijuana sales, alcohol beverages, and other goods due to legalizing recreational marijuana;
  • Accounts for reduction in tax revenues due to repeal of the 3% excise tax on medical marijuana; and
  • Provides a breakdown allocating the net effects on various government entities receiving state sales and excise tax revenues.

The Tax Note utilizes analysis from Anderson Economic Group’s AndCan Index, a proprietary monthly index that tracks consumer demand for U.S. cannabis products. Launched in June 2017, the AndCan Index builds on over three years of comprehensive coverage of the U.S. cannabis industry.