LANSING – Gov. Gretchen Whitmer’s administration, which is using a new tax on marijuana to fund road projects, has refused to fully release an internal analysis of how additional taxes on pot would impact the cannabis industry and whether they would shift more purchases to the illegal market, reports the Detroit News.
In November 2023 — about 14 months before Whitmer publicly proposed a wholesale tax on marijuana — the state’s Cannabis Regulatory Agency provided officials in the governor’s office a four-page memo on the potential repercussions of a similar tax.
Amid an ongoing legal fight over the new 24% wholesale tax, The Detroit News learned of the memo and attempted to obtain it under the state’s Freedom of Information Act, which states that the public is “entitled to full and complete information regarding the affairs of government.”
Whitmer insisted the tax, to raise $420 million, would pay for road and bridge repairs in the state.
But the Department of Licensing and Regulatory Affairs has released only a heavily redacted version of the memo, specifically shielding all of the information about how the Cannabis Regulatory Agency expected new taxes to affect the marijuana industry.
In a letter Friday, Adam Sandoval, deputy director of the Department of Licensing and Regulatory Affairs, upheld the decision to hide the information, saying redactions were allowed because the interest in encouraging “frank communication between and among LARA employees clearly outweighs the public interest in disclosure.”
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Yet, that “frank communications” exemption to the Freedom of Information Act is for messages between employees of public bodies. The memo was sent from LARA to the governor’s office. The governor’s office is not subject to FOIA and is not a public body, according to the state’s own official FOIA handbook.
The memo is significant because it would likely show whether Whitmer’s administration was warned of job losses or a shift of marijuana sales to the illegal market if taxes were hiked.
Likewise, an ongoing lawsuit from marijuana businesses about the new tax focuses on whether it goes against a ballot proposal that voters approved in 2018 to legalize recreational marijuana and set a 10% tax on retail sales.
The businesses have argued that voters purposefully selected the 10% excise tax on retail sales to keep retail prices reasonable and to diminish the illicit market. If Whitmer’s own team recognized that charging the wholesale tax would boost the black market, that could hurt her push to keep the tax and to keep the new money for the roads it’s generating.
Rose Tantraphol, spokeswoman for the Michigan Cannabis Industry Association, said her group believes “the memorandum is evidence that the state was well aware that such a tax would harm Michigan’s cannabis industry and send individual customers back to the illicit market.”
“The public deserves to know what issues the government considered before adopting this extraordinarily punitive tax, whether the analysis was shared with the Legislature before they voted … and whether the government even considered the impact it would have on the voters’ clearly expressed desire to remove marijuana from the illicit market,” Tantraphol said.
The nonpartisan Michigan House Fiscal Agency has projected the wholesale marijuana tax, approved last year, would generate about $420 million in additional annual revenue for roads.
On Wednesday, the Michigan Supreme Court issued a stay in the court case over the tax and sent it back to the Michigan Court of Appeals for expedited review. The stay effectively pauses discovery at the Court of Claims level while a Court of Appeals panel reviews the case.
Asked for a comment, David Harns, spokesman for the Cannabis Regulatory Agency, said the memo had been released in accordance with state law.
