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You’ve probably heard of the ‘pink tax’ – where manufacturers will make something in pink or even something breast-cancer related and charge extra for it.
The poor tax is even more insidious.
The poor tax refers to the phenomenon that it actually costs more to be poor than to be middle or upper class. So if you’re wondering why poor people can’t just ‘do better’ – this is one of the reasons.
For example, if your grocery budget is small, you’re being as frugal as you can. But you don’t have any money to buy more than exactly what you need. So maybe you buy smaller packages with less food in them – but food packaged that way actually costs more per ounce. You don’t have extra cash to take advantage of sales, either. Whereas someone with a little room in their food budget, or someone who has a full pantry they can rely on, can stock up on major sales. They might be able to buy a month’s worth of cereal when it’s only 1.77 a box, but someone who is poor can only buy one because there’s no wiggle room to stock up, even though it would save money in the long run. So although they are spending less per week they are paying more for the food they actually eat.
Someone who has a lower income is usually paid by the hour, which means if they have to miss work due to anything from the flu to jury duty, they’re out an entire day or more worth of income. That’s a big deal, so maybe they have to put this week’s groceries on the credit card. But because their income is low and their credit isn’t great, their interest rate is 34%, which makes that food cost 1/3 more! They’re trying to make the payments, but just putting a little bit of food on that card has maxed it out, because low income means a low credit card limit. So their score drops even more, and their interest rate might go up even further.
Now that they’ve missed work and have another bill to pay, they accidentally overdraw their account. Now, on top of being short money already, they have to pay a $35 per day fee for overdrawing their bank account. Where are they going to get the extra funds?
If you only make $15 an hour – which is double minimum wage by the way- it’s going to take you a long time to recover from even missing a couple days of work.
You’re trying hard to build up an emergency fund, but if you get more than $3000 in the bank – which is less than say first and last months rent if you need to move to a new apartment – you lose your SNAP benefits. So you can’t just move and find a cheaper place to live, you’re stuck where you are. Because if you save up money and lose snap, you’ll have to use that money for food.
Let’s talk about cars! You had an old but very reliable car to get back and forth to work. It wasn’t fancy, but it was paid off. You get rear ended at a stop sign, and because the car is old, the insurance company considered it totaled. They gave you $2000 to buy a new car. So you search FB marketplace and you put that money plus all your savings into the best car you can find. You don’t have money to get it checked out by a mechanic first, so you pick one that looks reliable and has an up-to-date inspection sticker.
You drive the car for 2 months, but you didn’t realize that the car was never maintained and the transmission goes. Your savings are gone, your car is too expensive to fix, and now you can’t get to work. What do you do?
Uber is expensive. You can’t afford that. It’s too far to walk because you can’t afford to live near where you work. Oh, and since you live in a semi-rural area (the only place you could afford) there are no buses. You can ride your bike, but the road is sketchy and all of the drivers get mad at you because there isn’t a shoulder to ride on. What do you do? (This is a true story, btw, although it didn’t happen to me).
Your only option now is to finance a car. So you go to a sketchy car dealership and they do give you a $2000 car, but they charge extra fees because you don’t have a downpayment. It has an R title because it was underwater once and everything smells bad.
And because your credit cards are maxed from buying groceries when you were sick, your interest rate is 29% over 3 years. How much more does that car cost verses someone who was able to buy a newer car at a much lower interest rate?
These are just a few real life examples of why it costs much more to be poor. Just getting a few hundred dollars of SNAP benefits a month doesn’t make up for this low-paying, hourly income and the extra cost of goods. You would love to enroll in school so you could get a better job, but you can’t afford it. And who would watch your kids while you go to class? It’s hard enough working while they’re in school, with all of the half days, holidays, and sick days. What do you do?
How are you supposed to pull yourself up by your bootstraps when there aren’t options for you to do so? You’re not lazy at all, you work really hard at your job and you show up. But you are stuck and worse, you are hated because you can’t ‘do better.’