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Michigan Retailers Fear Fallout from Cigarette Tax Increase

LANSING, Mich. -- Michigan's tobacco tax jumps 75 cents to $2 on Thursday to become the nation's second-highest, behind only New Jersey's $2.05-a-pack tax, reported the Associated Press.

Michigan retailers near the Ohio, Wisconsin and Indiana state lines are especially worried about the higher tax because cigarettes, chewing tobacco and other tobacco products are a lot cheaper just down the road. The tax on a pack of cigarettes is 77 cents in Wisconsin, 55.5 cents in Indiana and 55 cents in Ohio.

"You won't believe the number of people who have stood at my counter and said, 'Well, I'll have to start driving to Ohio or just order off the Internet,'" said Cecil Johnson, owner of CJ's Smoke Shop, located about 40 minutes from the Ohio line.

Charles Banas, a first-year student at Cooley Law School in Lansing, said he's not worried about Michigan's higher cigarette tax because his family in Pennsylvania mails him cartons of his favorite cigarettes, Jacks. "I ship them in," said Banas. "My price limit would be $5 if I had to get them from here. If it got to be more than that, I would quit."

Gov. Jennifer Granholm originally proposed the 75-cent increase to encourage people to stop smoking and help fill a gap in the Medicaid budget left by fewer federal dollars. The Democratic governor originally proposed the increase for the fiscal year that begins Oct. 1, but suggested moving it up to July 1 to help resolve a $250 million deficit in this year's budget.

The higher tax is expected to bring in $97.1 million for the current fiscal year, which ends Sept. 30. The Granholm administration estimates it will bring in about $313 million in additional revenue in the upcoming budget year.

Some Republican lawmakers had opposed the 75-cent tobacco tax increase, but the House and Senate gave it final approval last week when Granholm appeared increasingly open to signing GOP-backed bills aimed at improving the economy similar to those she vetoed last month.

A number of House Republicans sharply criticized the higher tax, suggesting it would increase smuggling and counterfeit cigarettes. They attempted to set aside 1 percent of the new cigarette tax revenue for more law enforcement, but the provision wasn't in the final version of the bill.
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