Anchoring the Poor in Poverty

There will be no more isolation
In our secret separation
--The Fixx

Thomas Sowell discusses two government policies that serve as taxes on the poor. Money printing (inflation) devalues dollars currently in existence. It is often called 'the invisible tax' because it is difficult for many people to recognize.

Rather than confiscating wealth by direct taxes, the State confiscates wealth by using newly printed dollars to procure resources. Subsequently, there are less resources to purchase--and more dollars to purchase them with. Prices go up and purchasing power goes down. The net effect is the same as direct taxes. Wealth has been transferred from private hands to the State.

Money printing disproportionately hurts the poor because low income people operate mostly with cash. Unlike the wealthy, they have little savings that they can convert into assets, such as gold, that hold their value during inflationary conditions. Inflationary conditions leave the poor running on a hamster wheel as they perpetually struggle to keep up with cost of living increases.

Another government-imposed tax consists of loss of welfare benefits. People trying to climb out of poverty while collecting welfare payments can face situations where a marginal dollar of production costs more than staying on welfare. Tax a behavior, and expect less of it (Econ 101). Welfare benefits serve as the poor's version of 'golden handcuffs' that encourage persistent squalor and discourage productivity.

Inflation and welfare anchor the poor in poverty.

position in gold