(LANSING) - Gov. Gretchen Whitmer's proposed fiscal year 2027 budget calls for significant tax increases on tobacco products, vaping devices and gaming as part of a plan to address a projected $1.8 billion Medicaid funding shortfall.
The proposal, scheduled to be presented to lawmakers Wednesday, would raise Michigan's cigarette tax from $2 to $3 per pack. It also would increase the wholesale tax on other tobacco products from 32% to 57% and establish a new 57% wholesale tax on vaping products and nicotine pouches, which are currently untaxed.
The vaping tax is expected to generate an estimated $95 million annually, with funds directed toward public health initiatives and youth mental health services.
The budget also seeks higher taxes on gaming to help stabilize the state's General Fund as federal pandemic-era aid expires.
State Budget Director Jen Flood described the proposal as a "responsible mix" of revenue enhancements and efficiencies aimed at protecting healthcare coverage for roughly 2.5 million Michigan residents enrolled in Medicaid.
Whitmer administration officials argue the tax increases are necessary to avoid deeper cuts to core services. Republican lawmakers, however, are expected to oppose the plan, citing concerns about increased financial burdens on residents.