Michigan Cannabis Tax Lawsuit Threatens Road Funding Plan as Construction Season Opens Across West Michigan

Governor Kicks Off 2026 Road Construction Season While Legal Challenges Mount Over Funding Source

GRAND RAPIDS, Mich. — Governor Gretchen Whitmer launched Michigan's 2026 road construction season Wednesday with a tour of a project near Plymouth and remarks at a site west of Detroit. But behind the orange barrels and construction activity, a legal battle over the funding source threatens to undermine the nearly $2 billion-a-year road plan that has become the centerpiece of Whitmer's final year in office.

The road construction season officially began with Whitmer touring a project on M-14 near Plymouth and making remarks during a ceremony at the site of rebuilding the highway west of Detroit. She proclaimed the start of major road construction work for 2026 at the ceremony.

Whitmer trumpeted over $31 billion invested since she took office in 2019, fixing 26,500 lane miles of road and almost two thousand bridges. She said she is proud to keep her promise of fixing the roads that she made when elected.

The OCRC plans on installing three roundabouts, overhaul two bridges, and work on four resurfacing projects in 2026. The Allegan County Road Commission has six major road resurfacing efforts on its slate. State Department of Transportation crews are looking to repair bridges over US-131 at 144th Avenue near Dorr, as well as I-196 over the Kalamazoo River east of Saugatuck.

Two Lawsuits Challenge Cannabis Tax That Funds Road Program

The road funding plan relies significantly on revenue from a new 24 percent wholesale tax on marijuana products. That tax is being challenged in two separate lawsuits filed by the state's recreational marijuana industry on the grounds it violates a 2018 voter initiative because the Legislature did not adopt it with supermajorities and because it exceeds the sales tax rate set in the Michigan Constitution.

One lawsuit argues the wholesale tax was adopted last year by the Legislature and signed by Governor Whitmer as part of a roads-funding plan without the three-fourths supermajorities in the House and Senate required to alter a voter-approved initiative. The state argues the wholesale cannabis tax is part of a road-funding law that does not touch the language of the initiative.

The second lawsuit makes a different legal argument. The Michigan Cannabis Industry Association argues the 24 percent wholesale tax creates a spiral that effectively sets a higher rate on marijuana sales than the 6 percent sales tax rate set in the Michigan Constitution.

"So, what's happening here is a tax levied on a tax which results in an unconstitutional over-taxation of Michiganders," Rose Tantraphol with the Michigan Cannabis Industry Association told reporters. "It effectively functions as a sales tax, creating a situation where cannabis is taxed multiple times, resulting in something called tax pyramiding that imposes a sales tax on consumers that's higher than the legal rate of 6 percent."

That is also on top of the 10 percent excise tax that was already in place under the initiative to legalize recreational marijuana approved by voters in 2018.

Industry Groups Say Tax Structure Is Unconstitutional

Tantraphol said the state's labeling of the tax does not change what it actually does to consumers.

"So basically what you have here is a state of Michigan calling this a 24 percent wholesale tax, but effectively this 24 percent tax is acting as a sales tax," Tantraphol said. "It's effectively acting as an additional sales tax on consumers. Cannabis customers are paying an effective sales tax rate that's higher than the legal 6 percent sales tax rate."

The industry also informed reporters that their first lawsuit against the wholesale tax is now headed to trial.

Road Funding Relies Heavily On Cannabis Tax Revenue

The official estimated revenue of about $420 million a year is a significant portion of a $2 billion-a-year roads plan. Robert Schneider, a senior research associate with the nonpartisan, not-for-profit Citizens Research Council of Michigan, told reporters the tax could be a key portion of Whitmer's last best chance to fully fund her signature campaign promise to fix the damn roads.

"If the tax were to be eliminated by the courts, that would put a big dent in the long-term outlook for road funding," Schneider said.

The package includes eliminating the sales tax on fuel purchases and replacing it with a separate gasoline tax, which ensures all taxes collected at the pump go to roads. Some corporate tax revenue is also now used for roads. But a significant portion of that road funding is in question because it relies on revenue from the new wholesale tax on cannabis products.

An industry spokesperson said it would be a mistake for the state to continue to count on revenue from the wholesale tax for road revenue.

"There's nothing sustainable about the road funding plan," Tantraphol said. "It was established through an unconstitutional process and sets up a tax structure that is illegal. The road funding compromise singled out the cannabis industry and has already triggered business closures and job losses. Undercutting one industry isn't going to raise the revenue that the state hopes to raise."

One Or Both Cases Could Land With Michigan Supreme Court

One or both of these cases will likely land eventually with the Michigan Supreme Court. If the tax is overturned, that money would not be easily replaced, and fixing that would be a heavy lift in the months remaining of this session of the Legislature.

This is something of a legacy issue for Whitmer since it is a key portion of her last best chance to fully fund her signature campaign promise to fix the damn roads.

The green flag has dropped on the six-month-long orange barrel season in Michigan. The start of construction season also means the start of having motorists be aware of safety in road work zones, according to Alex Doty of the Ottawa County Road Commission.

For regular updates, visit the current road work and closures website and view an interactive road work map. You can also visit the website to view a list of all planned OCRC construction projects for the current construction season.