Report calls for new marijuana taxes to help promote minority ownership

An advisory group is recommending new taxes on marijuana sales to raise millions of dollars that would be used to improve diversity and help disadvantaged groups succeed in the industry.

Data collected by the Michigan Marijuana Regulatory Agency in December show that only 3.8% of those with an ownership interest in licensed recreational marijuana businesses in Michigan are Black and only 1.5% are Hispanic or Latino, according to an agency report

The voter-approved Michigan Regulation and Taxation of Marijuana Act of 2018 directed the agency to create a plan to "promote and encourage participation in the marijuana industry by people from communities that have been disproportionately impacted by marijuana prohibition and enforcement and to positively impact those communities."

The agency's Racial Equity Advisory Workgroup released its recommendations Tuesday aimed at improving access to capital for Black and brown businesses, along with technical, educational and other forms of assistance. Implementing some recommendations would require action by the Legislature.

The agency "is committed to making Michigan the model agency in the country, including being a leader on diversity, equity and inclusion in the marijuana industry," the report said.

Recommendations include:

Reinstating a 3% excise tax on medical marijuana sales, which was repealed in 2016, and dedicating 30% of the proceeds to a social equity capital Investment program. According to the report, levying such a tax on the $319.3 million in medical marijuana sales in 2020 would have generated close to $9.9 million in tax revenue, with about $3.3 million going to social equity capital investment. Another 25% of the proceeds would go to the host municipality, 30% to the host county, 5% to the sheriff, and 10% to the Michigan Marijuana Medical Research Fund. Medical marijuana sales, legal since 2008, are already subject to the 6% sales tax. For recreational marijuana, which has been legal since 2018 and is already subject to a 6% sales tax and a 10% excise tax, creating a new 1.5% tax on transactions between license holders, such as sales between producers and retailers. The report does not say how much the new tax is expected to raise, but 20% of the proceeds would go to the social equity investment fund, with 30% going to the licensee's host city, 20% to the host county, 20% to the school district, and 10% going to medical marijuana research. Eric Foster, who chaired one of the work group's subcommittees, said Monday the tax could generate $2 million to $3 million a year in total, but cautioned that was a rough estimate.   Using money raised by the new taxes to provide loans or grants to social equity license applicants to help with startup and/or operating costs, as well as workforce training programs and technical assistance. Training and partnership programs "for social equity individuals who lack direct financial and professional operational experience to start a licensed business but meet a multitude of key social equity and social economic criteria as an eligible employee to ownership candidate." In one program, eligible employees would work for large operators committed to assisting with capital and technical requirements for the employee to graduate to owning a marijuana business. Integration of recreational marijuana with economic development and land bank agencies "to increase land use access for social equity applicants and allow for economic development programs to be used in the development of social equity marijuana businesses." Reallocate some funding currently used for grants to counties for targeted grants "to increase the presence of Black and brown-owned businesses in the cannabis space, as well as helping brown and Black businesses experience longevity." A crowdfunding platform hosted on the agency's website to serve as a connection between local investors and local marijuana businesses located in economically disadvantaged communities. Called the Michigan Marijuana Market, the platform would "ultimately boost the likelihood of success for locally owned businesses, which are critical to a community's economic, social and political vitality," the report said. Requiring larger marijuana companies, as a condition of license renewal, to purchase a certain amount of their supplies and services from disadvantaged companies. Training sessions for municipalities to learn about social equity programs and presentations, with bilingual content, to help social equity license applicants understand the steps in licensing and building a marijuana business. A new microbusiness license. As with the existing microbusiness license, the growing, processing and sale of recreational marijuana would be allowed under a single license. But the new license would allow 300 plants, up from 150, and allow the microbusiness to both obtain mature plants from licensed growers and use licensed processors. The changes would insulate the microbusinesses from crop failures, ensure continuous supply, increase the range of available products for sale, and reduce capital requirements by making the purchase of processing equipment optional, the report said.

 

Members of  the work group met Monday with reporters to discuss their recommendations. 

"This is a really, really progressive initiative," said Barton Morris, a lawyer and chair of one of the work group's five subcommittees. "It’s going to make Michigan a leader in our industry, throughout the entire country."

While the chairs of the work group's subcommittees described their recommendations as innovative and a chance to build wealth and opportunity in communities of color, they also said it is now time to begin the hard work of turning their ideas into reality. 

This is just the beginning, said Tatiana Grant, a subcommittee chair.    

Andrew Brisbo, executive director of the Michigan Marijuana Regulatory Agency, said he will develop a permanent equity and diversity working group to follow through on the recommendations.

The work group, which has met monthly since last July, was composed of state lawmakers, representatives of municipalities with significant minority populations, representatives of minority-focused industry and broader business groups, attorneys with experience in racial disparity and equity issues, and individuals with experience in banking, finance  and real estate.