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June 30, 2004 - Deanna McNamara has been in the cigarette business less than a month and she's already worried about losing customers and possibly closing.
Michigan's tobacco tax jumps 75 cents to $2 on Thursday to become the nation's second-highest only behind New Jersey's $2.05-a-pack tax.
"I'm very concerned," said the 28-year-old, who took over the Smokers Oasis earlier this month. "I'm hoping this doesn't put me and my kids on the street."

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 between Ypsilanti and Milan 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," the 22-year-old said this week as he sat at a downtown Lansing bar. "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.
The new tax will push the cost of a pack of Marlboro cigarettes - now at about $4.33 - over $5. The tax on a carton of cigarettes, which includes 10 packs, will go from $12.50 to $20 on Thursday. A carton now costs about $45.

On top of the state tax on tobacco products, there also is a 39-cent federal tax and 20-cent state sales tax tacked on to a pack of cigarettes.
Mike James, a 20-year-old telecommunications student at Michigan State University, said he might have to smoke less than the two or three packs he now smokes a week when the higher tax takes effect.
"There's no way I can afford it," said the Jackson native, sitting outside a coffee shop in East Lansing. "If it comes down to paying rent and smoking, I won't buy cigarettes."
If smokers buy fewer cigarettes, stores won't need as much of the product and that could hurt local distributing companies.

W.J. Burgess, vice president and general manager of cigarette distributor Hartland Distributing, said he expects the higher tax will mean a hit of at least 15 percent to his business.
The last time the state increased the cigarette tax, from 75 cents to $1.25 in August 2002, Burgess said the company lost so much business it had to close its Monroe facility.
Michigan was one of 21 states to raise its tobacco tax two years ago, according to Arturo Perez, a fiscal analyst for the National Council of State Legislatures. Last year, just 15 states increased their tobacco tax and fewer are expected to do so this year, he said.
"There's still some states raising cigarette taxes, but all and all we're probably seeing less ... because of the degree to which they have raised their taxes," Perez said.
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.
Even without additional funding, the Michigan State Police already are beginning to train their troopers and other local law enforcement officers along the state line to look for counterfeit and smuggled cigarettes, department spokeswoman Shanon Akans said.