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Could You Afford to Be Poor?

http://online.wsj.com/public/article_print/SB121380066376984483.html

A 2006 study from the Brookings Institution documents the "ghetto tax," or higher cost of living in low-income urban neighborhoods. It comes at you from every direction, from food prices to auto insurance. A few examples from this study, by Matt Fellowes, that covered twelve American cities:
• Poor people are less likely to have bank accounts, which can be expensive for those with low balances, and so they tend to cash their pay checks at check-cashing businesses, which, in the cities surveyed, charged $5 to $50 for a $500 check.

• Nationwide, low-income car buyers, defined as people earning less than $30,000 a year, pay 2 percentage points more for a car loan than more affluent buyers.

• Low-income drivers pay more for car insurance. In New York, Baltimore, and Hartford, they pay an average $400 more a year to insure the exact same car and driver risk as wealthier drivers.

• Poorer people pay an average of 1 percentage point more in mortgage interest.

• They are more likely to buy their furniture and appliances through pricey rent-to-own businesses. In Wisconsin, the study reports, a $200 rent-to-own TV set can cost $700 with the interest included.

• They are less likely to have access to large supermarkets and hence to rely on the far more expensive, and lower quality offerings, of small grocery and convenience stores.

created by charlatan on Jul 29, 2008 at 09:29:56 am     Comments: 13

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Comments ... #

I agree with all points in this article save one - higher banking fees. It is a fact that in areas where check cashers compete, it is LESS costly to use a check casher for check cashing and bill payment then it is to maintain a bank account if the same low account balance numbers are used. For example, if there is a mishap and an NSF occurs in a low balance account the returned check fees and other added fees frequently wipe out the account holder. As an example National City, on some low balance accounts for instance, if they pay a check that puts the account into a negative balance position, charges a $30.00 NSF fee and $9.00 PER DAY for every day the account is overdrawn. The decision not to bank and use check cashers by some low income earners can be a good decision.

posted by holland on Jul 29, 2008 at 11:58:11 am     #



The grocery thing really gets on my nerves. Living in the Old West End has it's ups, but one of the real downers is having to drive to go grocery shopping. There is a grocery store on the corner of Cherry and Bancroft but it's a total example of what Charlatan posted above.

http://www.portfolio.com/views/blogs/market-movers/2007/11/15/explaining-the-absence-of-grocery-stores-in-poor-neighborhoods?addComment=true

http://www.dallasnews.com/sharedcontent/dws/dn/opinion/viewpoints/stories/DN-berg_15edi.ART.State.Edition1.369033a.html

posted by jhostetler on Jul 29, 2008 at 12:33:56 pm     #



Then there are the Rite Aids. God I miss the Pharms. The poor are screwed because their checks bounce, their houses and cars are in high crime areas, so higher loses, everything does indeed cost more when you are poor, but especially when you live in a poor neighborhood. Poverty and crime are partners in the city.

posted by prime3end on Jul 29, 2008 at 02:27:26 pm     #



These items are not about the "poor", whoever they are. The financial dynamics that happen throughout the spectrum of wealth.

Anyone below the top level of wealth can say that they pay more for each of these things than the people in the level above them.

Banking: economy of scale. The more you invest, the less the fees. When you get to the top it reverses and they practically pay you to invest. You enter private banking at which point not only are there no more fees, but tellers come to your house to serve you.

Loans (car loans, mortgages and rent-to-own): less risk. The better your balance sheet the lower the risk the lower the rate.

Insurance: lower risk. The better your balance sheet, the lower your risk of fraud the lower the premium.

posted by babbleman on Jul 29, 2008 at 03:15:21 pm     #



Listen to Scrooge there:

Fuck the Poor!

Jesus said the same thing. It's in the bible in the addendum.

posted by charlatan on Jul 30, 2008 at 01:43:04 am     #



Fuck the poor? Who said anything about fucking the poor? I was talking about math. The purpose of this article, and the reason it was posted here, was to provide justification to increase the "compassion" tax which is what fucks the poor. The purpose of liberal compassion is not to help the poor, it is to fuck the rich. The fact that it also fucks the poor is beside the point.

You want to talk about fucking the poor? Consider that 22% of what consumer's pay for goods is embedded taxes. Half of that, 11%, is for social programs. Another 3-5% is for the cost of complying with taxation which is very expensive because it is based on income which means that the income of 150 million + entities has to be double tracked. And God knows how much is due to employment regulations, minimum wages, prevailing wages, union costs and other "fair practice" regulations such as predatory lending that this article references.

Let's let the liberals off easy and just call the liberal tax effect an even 20% of the cost of goods.

This, of course, is what liberals do - increase the cost of living for the poor by 20% so they they can "help" them. This is liberal compassion.

There is a tax plan called the FairTax that would tax only consumption (eg. all taxes would be replaced with a single sales tax). Under this plan, everyone (rich, poor, middle class, black, white, etc.) would receive back from the government an amount equal to the taxes paid on poverty level consumption. So, effectively, until you spend over $22 thousand a year, you pay 0 taxes. This means that the poor are completely untaxed and their buying power is increased substantially.

How many liberals do you think support this tax? You would think they all would because it helps the poor so much. Unfortunately, virtually no liberals support it.

Why not? Because it doesn't fuck the rich. It takes away the single biggest tool that liberals have for waging class warfare - the knowledge of what we each make and the legislation to base taxation on it. This is what liberals care about - and they use the poor as a human shield to justify it.

Liberal policy is not driven by compassion for the unsuccessful - it is driven by hatred of the successful. When given the chance to help the unsuccessful, they refuse to participate because it doesn't hurt the successful. So that tells you where their priorities are - fucking the poor is no problem for liberals.

posted by babbleman on Jul 30, 2008 at 08:32:37 am     #



I'd love to see something like a FairTax, or one of its many variants. However, the government will NEVER give up the sheer population control it has through the IRS. As well, no proposed change can ever pass the U.S. Congress without being loaded up with so many exceptions for the wealthy, that its use as reform drops to zero.

The tax code is a huge mess of bribes for various sectors of the population. Why is there a lower tax rate for married couples? Why is there a tax break for paying mortgage interest? Why, for having dependents and for being blind and all that shitnoise? And all that's just for what's seen on the common tax form, and doesn't even touch the huge tax breaks that exist for the wealthy and for corporations and other businesses.

Greenspan went before the Congress and basically said that a National Sales Tax could replace the income tax ... and then in the next paragraph, blatantly said that the NST would have to be implemented CONCURRENTLY with the income tax. We all know what that means: The government NEVER allows a tax to be repealed. If any such consumption tax ever makes it through the Congress -- suitably loaded up with exceptions that allow the wealthy to again avoid it -- it will just be another tax that we'd have to pay.

The working man watches a solid 40% of his income get stolen by all levels of government each year. We are slaves in all but name.

posted by GuestZero on Jul 30, 2008 at 10:56:16 am     #



In other words, the USA is a great nation ... if you're rich. That's why the world's financiers love to park their money here.

BUT if you're poor, or the working poor, or the overall working class, then the USA is sucking more ass for you each year.

posted by GuestZero on Jul 30, 2008 at 10:57:55 am     #



Park money here ? ? ? In the US? Any international trader who parked money here over the past year lost almost 30% of the valve as the US$ continues to "suck ass" as you say.

posted by jimavolt on Jul 31, 2008 at 05:12:21 pm     #



Any World fanancier worth his salt is buying here, not parking money. The US$ is as you say "sucking ass". Everyone owning greenbacks has lost 25% of value in the last year.

posted by jimavolt on Jul 31, 2008 at 06:13:55 pm     #



How much of taxes go the perpetual war for just of reach peace? Instead of productive, useful goods and services. You're a jingoist, right?

Perhaps you should define liberal? It's like saying smurf. It has little to no meaning as does does conservative, left, right, etc?

I mean, you spout off boring Marxist capitalist theory better than most boring sociology professors.

I think you're playing the narrow minded hypocritical blame game....

posted by charlatan on Jul 31, 2008 at 06:37:48 pm     #



GZ: If you're part of the working poor, the US sucks pond scum. If, however, you are either filthy rich or a ward of the State, you've got it made.

posted by madjack on Jul 31, 2008 at 07:47:54 pm     #



Re: 22% embedded taxes and FairTax.

Unfortunately, prices paid by the poor WILL NOT fall anywhere near 22 percent under the FairTax.

This is because the largest expense - by far - of the poor is rent. (For example, I pay two-thirds of my income to rent a room in a house.)

The largest embedded tax in rent is NOT income tax (which will go away under FairTax), it is the property tax. Since property taxes will not disappear under the FairTax, the total removal of embedded taxes under the FairTax will not be anywhere near 22%, thus rents cannot fall anywhere near 22 percent.

Worse, many landlord today get an income tax BREAK by owning rental property, since they get a writeoff for "depreciation" on their appreciating rental properties. This allows many landlords to reduce their income taxes while enjoying positive rental cash flow.

Eliminating the tax REDUCTIONS landlords currently enjoy cannot eliminate income taxes embedded in rent.

Therefore, I do not expect rents to fall to any meaningful defgree. IF prices of other goods and services do fall by 22 percent, a 0% reduction in rents will represent overall an 11% reduction in prices for renters paying half their income for rent.

Add in the new FairTax, and these renters are no better off than they were before the FairTax.

posted by poor_boomer on Dec 21, 2008 at 02:45:34 am     #