Comics Economics, Part 4

By | Wednesday, November 12, 2008 4 comments
You know, I was thinking about talking next about buying/selling comics internationally with fluctuating exchange rates during this global recession, but as I was rolling over some of the ideas in my head, it seemed to me that I ought to cover something a little more basic first.

Let me start by asking a simple question. Who pays more for their comics: me or Marvel editor Tom Brevoort? Brevoort does.

Let me ask another question. How much do you pay for an average comic book these days? Hint: the answer is not $2.99.

How much you pay for any given issue actually depends a lot on where you live. Why? Because of taxes.

Taxes, in a broad sense, are fees paid to the government. Those fees are then used by the government to pay for social services such as road maintenance, police, school systems, and public parks. Every society has different values, and is going to allocate those resources differently, but the upshot is that the money you pay in taxes gets aggregated with everyone else's, and is used to pay for things that benefit that society in some way. (Whether or not that benefit is greater than what was actually paid in taxes is often a matter of debate, however!) The U.S. government collects taxes from its citizens in a number of different ways, but the one method I'm focusing on here is the sales tax.

For just about everything you pay for, a percentage of what comes out of your wallet goes to the government in the form of sales tax. What you might not realize is that the sales taxes you actually pay go to different things, and none of it goes to the federal government. Most states in the U.S. have a state sales tax that is imposed on a majority of goods and services sold within that state. Most range between 4%-7%, meaning that whatever amount you pay on a product, a percentage of that is added on top of the base price. So a $2.99 comic book actually costs between $3.11 and $3.20 depending on what state you live in.

But to complicate matters, counties and some cities ALSO apply sales tax on top of the state sales tax. Those sales taxes have a relatively broad range, so that $2.99 comic costs me $3.18 here in southwest Ohio but $3.30 if I buy the exact same comic when I'm staying with my girlfriend in Chicago. (Brevoort, by the way, will pay $3.24 in New York City where I know he does his shopping. I believe he lives in New Jersey and, if he shopped for comics there, would only pay $3.20.)

The Local Comic Shop that sells you a comic is the one who's actually charged taxes from the government. They merely pass the additional costs on to you, the consumer. When you hand the LCS your $3.18 (because you're a smart shopper and went to the place where you can get your comics cheaper) that does indeed go in his till, but when he fills out his tax forms, he's going to have to make a note on that sale and then pay the government nineteen cents.

Now, you're thinking, "Wait. You're talking about a twelve cent difference -- you're talking pennies here. Pennies are effectively obsolete."

Well, at that level, you'd be right. We are talking about pennies and wouldn't have that big of an impact on most people's budgets. But what if you spent $25 a week at your LCS? (My small amount of anecdotal evidence suggests that $20-$25 seems to be about what the average comic fan spends per week.) If that LCS is here in SW Ohio, your monthly comic expenditure would be $106.25. If that LCS were in Chicago, your monthly comic expenditure would be $110.25. Let me put it this way: if I have exactly and only $110 a month for comics, I can buy two more new comics a month where I'm living right now than if I lived in Chicago.

(I'm using Chicago as an example, by the way, because it has the highest sales tax rate of all major U.S. cities -- a whopping 10.25%! My home town is 6.25% -- not the lowest in the nation, but notably lower than average.)

And the more you buy, the more noticeable the difference becomes. I understand that it's not uncommon for Chicago residents to head up to Wisconsin for larger purchases like cars. A car with a $20,000 sticker price would cost $22,050 in Chicago versus $21,100 in Wisconsin. It's hardly surprising that people would be willing to spend a few more dollars in gas and drive out of their way to save $1,000.

By and large, tax rates are not very directly affected by a recession. Interest rates are another matter, but tax rates (at least here in the U.S.) tend to stay fairly stable. But during a recessionary period, people naturally tend to spend less. Which means that they are giving the government less money in the form of sales taxes. Which means the government has less money to spend on things like road maintenance, police, school systems, and public parks. And public libraries, a topic I discussed the other day.

While sales taxes don't figure prominently into a discussion of the current recession, I think it's something that needs to be brought up before I get to the topic of international trade. The fundamental lesson that needs to be understood before we get to that topic is that a $2.99 comic does not cost you $2.99 and, in fact, can fluctuate in price fairly substantially depending on where you live.

To be continued...
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Anonymous said...

Some states don't tax all items. NJ, for example, deosn't tax magazines and comics fall into that category for the state, so if Brevoort bought his books in NJ, they'd be tax free.

Ty said...

Canadian's are taxed at two levels:

- Provincial Sales Tax (PST) which varies from province to province
- Goods & Services Tax (GST) for everyone

The GST is 6% (down from 7% a couple of years back). In Ontario the PST is 8%. Each $2.99 comic book I purchase in Toronto is about $3.41. And that is only if I am charged the US cover price. Marvel's $2.99 US books are $3.50 CAD or $3.99 after taxes.

Great series! Thank you very much

kenny said...

"Which means the government has less money to spend on things like road maintenance, police, school systems, and public parks. And public libraries...[.]"

And, since I'm a cynical reader, bailouts.

Ty said...

Whoops-- the GST number should be 5% now... totally forgot about the second tax decrease.