‘Tis the season! Earlier this year, the Internal Revenue Service announced the annual inflation adjustments for a number of tax provisions for the year 2014, including tax rate schedules, tax tables, and cost-of-living adjustments. Those numbers reflected good news for most taxpayers since inflation has remained low for 2013.
The latest annual inflation rate for the United States as reported by the Bureau of Labor Statistics (BLS) indicates that the price of most consumer goods as reflected in the Consumer Price Index (CPI) has risen 1.0% over the year (the core index rose 1.7%).
But tell that to the lords-a-leaping and the ladies dancing. While the BLS’ CPI has remained somewhat steady, PNC Wealth Management’s CPI – the Christmas Price Index® – has increased by a whopping 7.7%.
The PNC Christmas Price Index® is similar to the Consumer Price Index – which measures changes in prices of goods and services – but instead, it measures the cost of buying one set of each of the gifts given in the song “The Twelve Days of Christmas.” In case you can’t remember all 12 days (admit it, you’re always forgetting at least one), here’s a quick reminder:
12 Drummers Drumming,
11 Pipers Piping,
10 Lords-a-Leaping,
9 Ladies Dancing,
8 Maids-a-Milking,
7 Swans-a-Swimming,
6 Geese-a-Laying,
5 Gold Rings,
4 Calling Birds,
3 French Hens,
2 Turtle Doves anddddd
A Partridge in a Pear Tree.
If your true love shelled out enough to cover the costs of everything on the list this year, those 78 items would cost $27,393.17, an increase of 7.7% over last year (downloads as a pdf). That’s the largest increase in recent years; in 2010, the index jumped 9.2%.
If your true love really wants to impress you by nabbing all 364 items – the number of the items as repeated throughout the song over and over – he or she will have to cough up $114,651, an increase of 6.9% from 2012.
What accounts for the price boost? The cost of labor. Those ladies dance for a lot more this year: the cost of the 9 Ladies Dancing is $7,553 in 2013, a 20% increase from 2012, according to PHILADANCO, a modern dance company in Philadelphia. Similarly, a good leaping lord is more expensive this year, too, according to The Pennsylvania Ballet, costing $5,243, a 10% increase from 2012. That’s not terribly surprising since the cost of services has increased over the history of the CPI while the price of goods has slowed.
Labor costs for the 11 Pipers Piping and the 12 Drummers Drumming crept up just slightly, a 2.9% increase.
Not all labor saw an uptick, however. The 8 Maids-A-Milking receive minimum wage, or $7.25 per hour, a number that, despite criticisms, hasn’t moved up since 2009. The total of their wages would be just $58.
The price of six other items on the list (Partridge in a Pear Tree, 2 Turtle Doves, 3 French Hens, 4 Calling Birds, 5 Gold Rings, 6 Geese-a-Laying, and 7 Swans-a-Swimming) remained the same as last year. Despite no real movement on costs, it’s still pretty expensive to buy those swans: they’ll cost your true love $1,000 each. The costs of the swans, as well as the partridge, doves, and geese were provided by the National Aviary in Pittsburgh (if you’re wondering about the calling birds, those costs were provided by a national pet chain).
Only one item on the list dropped in price: the Pear Tree was a little less expensive this year, dipping by 3.2%, according to Cinnaminson Nurseries, a New Jersey nursery.
The totals of these items reflect the costs as if your true love went shopping the traditional way: actually going to jewelry stores, plant nurseries, and the like. If your true love went high tech, the cost would be more – likely a surprise for most shoppers. This year, buying those items online would cost $39,762.61, about 45% more than buying in person.
Jim Dunigan, managing executive, Investments of PNC Wealth Management said, about the difference, “In general, Internet prices are higher than their non-Internet counterparts because of premium shipping costs for birds and the convenience factor of shopping online.” You can likely blame fuel costs as part of the uptick – it’s a fairly sure bet that Amazon won’t be delivering geese by drones. I have to think shipping most of the items is a real nightmare, not to mention incredibly noisy.
Sales tax (or use tax, if you’re shopping online) might be payable on your Christmas gifts – but that would depend on where you live. While 45 states impose some level of sales tax, there is dramatic variation between what goods and services are subject to tax. This is especially true when it comes to the costs of services. PNC is located in Pennsylvania where food (except for ready-to-eat), most clothing apparel, and medicines are nontaxable. But that pear tree? Taxable. Those gold rings? Taxable. Pets and most animals? Also taxable. But those milkmaids? Not taxable; as a farm and dairy state, most dairy-related services are exempt. Figuring the exemptions from state to state would be wildly time-consuming, so the CPI is tax neutral: interested consumers and tax geeks like me can figure those differences on our own.
The Christmas Price Index® began 30 years ago when the chief economist at PNC Bank decided to figure out how much it would cost to buy each of the gifts. Since the beginning, annual increases have averaged 2.9%, which exactly matches the U.S. inflation index. There’s a slight variation over time: since the history of the CPI, the cost of the times has increased a total of 116%, while inflation is up 122% for the same time.
The cheapest year to show off your Christmas spirit was in 1995. The most expensive? That would be this year. The biggest increase in price between years occurred in 2003, with a spike of 16.0%.
The Christmas Price Index® offers a fun peek at the relative costs of goods and services each year. It’s now an annual tradition… kind of like this one:
