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BY MARK REPASKY
Medill News Service | Friday, January 20, 2006 | (No comments posted.)
For more than two decades Richard Auer has owned and managed the Citgo gas station at the northwest corner of Highway 45 and Camp McDonald Road in northwest suburban Mount Prospect.
He was planning on selling the station to pay for his retirement after his two children finished school. His oldest plans to start college in the fall.
But retirement for the 47-year-old Norwood Park Township native may come sooner than he expected and without the cushion of his investment.
He says he may be forced to turn off his gas pumps and lock his doors for good if the Cook County board votes to double the tax on a pack of cigarettes to $2.
"It's going to put me out of business," Auer said, because his cigarette-buying customers are already warning him they'll take their cigarette and gasoline business elsewhere. Gasoline and cigarettes represent his two most profitable products, Auer said.
Cook County Board President John Stroger (D-Chicago) proposed the increase in December to help balance the county's 2006 budget. It is expected to generate more than $68 million in additional revenue.
Last year Gov. Blagojevich proposed an increase in the state's cigarette tax by 75 cents to pay for a capital construction plan. Three years ago Cook County passed an 82-cent hike that brought in an additional $90 million per year. And Chicago is considering its own cigarette tax increase.
Health groups such as the American Lung Association and American Heart Association applaud these measures because they create an economic disincentive for smokers.
But gas station owners like Auer, whose stores are close to county borders, claim smokers don't stop smoking -- they stop shopping.
"I've had the same customers for years," Auer said. "They come in and tell me they are going across the border (to buy cigarettes). They are also buying pop and gas."
Opponents of the increased cigarette taxes question how far governments can go before black markets are created, and sales and cigarette tax revenues decline due to falling sales.
So, how much can governments rely on excise taxes to balance budgets? Is there a "tipping point?"
"There probably is," said Matthew Farrelly, a senior economist and director of the Public Health Economics and Policy Research Program at North Carolina-based RTI International. Farrelly has studied cigarette tax implications on state revenues and tax evasion for more than 10 years.
"But so far it's only theoretical," he said. "Any time a state has increased a cigarette excise tax, it has increased revenue."
There is usually some fallout, he said. "Some people quit, some people cut back, some people make efforts to go purchase from cheaper places."
But the fallout hasn't so far been large enough to offset the increased revenue, he added.
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