We walk up to the bulletproof glass at the counter.

“Newports, short,” we tell the clerk, sliding payment to him through the slot below. He slides back our cigarettes and a receipt.

The damage: $7.50. Smokers looking for economic relief must love this store. It’s a dollar cheaper a pack than most stores in Chicago.

But if you’re the deficit-ridden city or Cook County, this store is not your friend. Not when the pack bears no evidence that the 68-cent Chicago tax and the $2 Cook County tax have been paid.

As cigarette taxes have gone up, smokers have been finding ways to avoid them, from driving out of state to buying online.

A Tribune spot-check found that in some cases, local retailers are helping out, selling untaxed cigarettes right off their shelves.

In 2006, city revenues from cigarette taxes came in at a little less than $32 million. By 2008, they had declined to about $25 million. This year, they’re projected to drop again.

“In most places, tax increases lead to increased revenues,” said David Merriman, a University of Illinois at Chicago economist who has studied cigarette-tax avoidance worldwide for 15 years. “Chicago would be the only place I know of where it’s gone the other way.”

Ed Walsh, spokesman for the city’s Revenue Department, said cigarette sales in the city have plummeted 68 percent since 2001, partly because of fewer people smoking and partly because of more smokers buying elsewhere.

“Consumers buying cigarettes outside Chicago or even outside the state also has an impact,” he wrote in an e-mail.

To that end, Merriman will soon publish a study with a staggering finding: 75 percent of cigarettes smoked in Chicago come from packs that don’t bear city tax stamps. The rate of tax avoidance here dwarfs the national average of about 20 percent, he said. In New York City — the only place in the country where cigarette taxes are higher — the avoidance rate is about 50 percent, he said, still sharply lower than Chicago’s.

Add it up and about $10 million a month in possible cigarette-tax revenue doesn’t reach city coffers, according to Merriman’s projections.

So where are the illicit smokes coming from?

Certainly, scores of smokers parade to Indiana and surrounding counties in Illinois, where the taxes are lower. And some buy illegally online.

At six stores, Tribune reporters bought packs of Newport that cost $5.20 to $8.20 — and none had city or county tax stamps. Five were on the city’s South Side, with one in nearby Hometown. Compare their prices with dozens of other stores throughout Chicago, where the prices were in the high $8 to low $9 range. The pricier packs bore city and county stamps.

Four of the stores where the Tribune bought the untaxed packs are owned by Oak Lawn businesswoman Dana Alsoudi, according to state and city records. She denied authorizing or buying cigarettes without the stamps.

“You just opened my eyes to something I don’t like,” said Alsoudi, 38.

Alsoudi said her managers buy in bulk, pay in cash and work special discounts from distributors, all of which allow her stores to price cigarettes more cheaply.

“Of course we’d buy stamped packs,” she said. “I don’t want to pay the penalties.”

According to city and state records, one of the other stores where the Tribune bought untaxed cigarettes is owned by Manal Zahdan, whom Alsoudi identified as her sister. Another is owned by Samson Kadamandla. Neither could be reached for comment.

Illinois cigarette wholesalers must register with the state Department of Revenue and buy tax stamps that are affixed to the bottom of each pack. Wholesalers in Chicago or Cook County are required to buy and attach additional city and county stamps.

Every city business with a tobacco license undergoes at least one unannounced inspection every year to check for compliance with the city’s minimum-age buying requirement and tax stamps, said Efrat Stein, spokeswoman for the Department of Business Affairs and Consumer Protection.

The city is catching more violators. In 2008, 473 businesses were cited for violating cigarette-tax laws, up from 265 in 2007 and 289 in 2006, Stein said. In the last two years, they have confiscated 58,000 packs of unstamped cigarettes and levied $638,000 in fines.

But Stein acknowledged that the department’s 26 investigators have a mammoth task keeping tabs on the city’s 70,000 licensed businesses.

“One thing to keep in mind is that a business may be in compliance today and out of compliance tomorrow,” Stein said. “Investigators cannot be at all places at all times.”

To that point, the Tribune bought a stamped pack during the day and an unstamped pack at night at one of Alsoudi’s stores.

Violators are fined $15 for each unstamped pack, with a maximum fine of $1,000 for the first offense. The second time in a year, the fine stays the same, but the cap is lifted. If a business fails compliance three times in a year, their license to sell tobacco products can be revoked, Stein said.

Of the five city stores the Tribune found selling without stamps, only one has ever been cited for it, and that was in 2006, according to city records. Some of the stores have been found in violation of other city codes but largely passed the stamp inspection.

A competitor in the area called the inspections lacking.

“The cheating’s so blatant and obvious,” said Jim Kean, co-owner with his brother Raleigh of a Southwest Side gas station at 111th Street and Talman Avenue. “How can you miss people like that?”

The Keans said sales of cigarettes at their store declined sharply after the 2006 tax increase and have gone steadily down since — from about 10,000 packs a month in 2005, just before the tax increase, to about 3,000 packs a month today.

At first they thought they were losing all their cigarette business to nearby Indiana. But then they noticed stores around them, in the city and surrounding suburbs, advertising packs at lower prices.

So they started buying smokes from their competitors and discovered that the same stores with cheaper prices were selling unstamped packs, over and over, in broad daylight.

They sent a letter to one of the competitors’ alderman, George Cardenas, 12th, in 2006, complete with envelopes containing the illicit cigarettes, but got no response, Jim Kean said.

Cardenas told the Tribune that he had his staff direct the complaint to the city’s Department of Business Affairs to investigate further.

“I think people should play by the same rules, and if they’re breaking the rules, they should be held accountable,” he said.

But the Keans expressed frustration, noting that sales of unstamped smokes have continued for at least the last three years.

“Why the city or county can’t discover the same thing is beyond me,” Raleigh Kean said.

The brothers said that even if stores are caught, the fines provide little incentive not to keep selling cigarettes without the tax stamp.

“One gas station can cheat the city and county out of $26,000 a month,” Jim Kean said. “Of what impact is the maximum fine of $1,000 for a violation?”

Merriman, the economist, said he hadn’t previously considered the impact of retailers selling unstamped cigarettes, but it fits with a key finding in his study.

In summer 2007, he commissioned a group of college students to walk the city streets in 100 areas, blanketing the city, collecting more than 1,000 discarded packs of smokes and cataloging which tax stamps each bore.

He found that packs were much more likely to have an Indiana stamp the closer they were to the state border.

But he didn’t find a similarly strong correlation at the city and county level: Packs with Illinois state stamps weren’t dramatically less likely to bear Chicago or Cook County stamps the closer they were to the city’s borders, suggesting that some packs bought in the city don’t have city stamps.

“Maybe the (untaxed) cigarettes are coming to them instead of them going to the (untaxed) cigarettes,” he said.