How Lansing can regulate marijuana in Michigan

Gary Wolfram

Michigan legalized medical marijuana in 2008. Unfortunately, the legislation left a good deal of gray areas and had little regulatory supervision.

The Michigan Legislature is considering bills that will establish a strong regulatory framework for a competitive medical marijuana industry and provide valuable revenue for the state, its schools and local government.

By establishing tiers of independent, separate commercial enterprises, these bills will create a safer environment for patients who need medicine and create certainty for businesses. It will minimize the black market with its shady practices, fly-by-night actors and potentially dangerous products.

House Bill 4209 would generate between $44 million and $64 million a year — funds for local communities, public safety and public services. What’s more, Michigan has an opportunity to create thousands of jobs with a legitimate, licensed and regulated medical marijuana industry — including jobs for people who would otherwise be unemployed or underemployed.

My analysis of Michigan’s medical marijuana industry looked at the number of registered patients in Michigan, the percentage of patients who would purchase medicine from licensed provisioning centers, the average each patient purchases each month, the average retail price paid per ounce, and the growth of retail sales of non-cannabis items.

Using information available from Michigan’s Department of Licensing and Regulatory Affairs and sales data from other states that allow medical marijuana for registered medical marijuana patients in a multi-tiered system, I estimated HB 4209’s 3 percent excise tax would generate between $14.7 million and $21.2 million. The sales tax would bring in an additional $29.6 million to $42.3 million. The range of estimates depends upon how many registered patients choose to purchase their medication from retailers and if the legislation results in more patients seeking legalized treatment.

From the new excise tax revenues, municipalities would receive $4.4 million to $6.3 million; counties would get $5.9 million to $8.5 million; county sheriffs would receive $882,000 to $1.1 million; and Michigan’s General Fund would get $3.7 million to $5.3 million. This revenue distribution is based on the excise tax of 3 percent as proposed in the legislation.

The sales tax revenue would generate between $21.7 million and $31 million for the School Aid Fund, and between $7.4 million and $10.2 million for municipalities, with the remainder going to the General Fund.

The framework would open the door to job creation, creating 10,000 jobs upon implementation in Michigan, according to comparative data from other states like Colorado, which have extended experience with a marijuana industry.

By adopting a strong regulatory framework, we can promote safety for patients and create a stable business climate in Michigan that promotes free market competition and generates much-needed revenues that will benefit every community in Michigan.

More importantly, a regulated medical marijuana industry — where patients can get their medicine the same way they get their medication from a pharmacy — will expand patient access and assure them that they’re getting medicine that’s lab-tested and safe.

Medical marijuana has proven to be a useful product for more than 180,000 Michigan citizens and has substantial support among the people. Lansing now has an opportunity to put a strong framework in place that will protect patients, promote public safety, and generate significant revenue for the state.

Gary Wolfram, Ph.D., is the William E. Simon Professor of Economics at Hillsdale College and president of Hillsdale Policy Group.