It is very expensive to be poor in America. This paradox negatively impacts the lives of the approximately 40 million people in this country who fall under the federal government’s official poverty line – and the many millions more who are one paycheck, serious illness, or other unforeseen challenge away from joining that group.
America’s poverty tax takes many forms including how people who live in poor and other under-resourced communities pay more for a range of services, most of them low quality, such as food, housing, and healthcare. In fact, there is an entire industry that profits from exploiting poor people and others who are navigating economic precarity such as payday lenders and check cashing stores, rental properties that do not require credit checks, used car dealerships that charge usurious interest rates, pawn stores, rent-to-own stores, “health” providers (including dentists) that target Medicaid patients, and for-profit prisons.
America’s poverty tax also causes negative intergenerational economic, emotional, and health outcomes as well. Because they live in a state of economic precarity and day-to-day survival mode, poor people are unable to accrue wealth and income and other resources (such as social capital) to pass down to their children, which in turn deprives future generations of life opportunities.
The poverty tax does not exist in isolation: its negative impact (and literal cost) is amplified by racism and white supremacy, sexism, ableism, and other forms of prejudice and discrimination.
The many ways that America’s poverty tax keeps tens of millions of people in poverty and near poverty, is not a moral or character failing of those communities and individuals. Instead, America’s poverty tax is a lived example of how institutional and structural forces – in this context predatory and cannibal capitalism – create a trap that is very difficult if not almost impossible to escape.
Anne Kim is a writer, lawyer, and public policy expert with a long career in Washington, DC–based think tanks working in and around Capitol Hill. She is also a contributing editor at Washington Monthly, where she was a senior writer. Her work has appeared in the Washington Post, Governing, the Wall Street Journal, Democracy, and numerous other publications. Her new book is “Poverty for Profit.” Her previous book is “Abandoned: America’s Lost Youth” and the Crisis of Disconnection.”
In this conversation, Kim outlines how poor people are exploited for profit(s) by private and other self-interested actors across American society. Kim also explains how the American public’s understanding of poverty, specifically, and economic class, more generally, is in many ways incorrect.
This interview has been lightly edited for clarity and length:
Given the state of this country, how are you feeling?
How I’m feeling? I’m depressed and frightened, frankly, given the existential stakes we’re facing this fall. But ask me again after November, and I hope to be feeling differently! Relief, at least, if not optimism.
Even if we avert the catastrophe of a second Trump presidency, we’ve still lost our collective ability to solve big national problems – or even small ones. It’s hard to fathom today, but Congress passed the Civil Rights Act of 1964 on a vote of 289-126 in the House and 73-27 in the Senate. The Voting Rights Act of 1965 passed the House 328-74! I’m struggling to remember the last time we’ve had a rational, fact-based, nonpartisan, good-faith debate on any topic, whether it’s climate change, abortion rights, or inequality.
I think the maldistribution of income, wealth and opportunity is a huge factor feeding the discontent driving our current politics, but there’s no shortage of bold ideas and great scholarship on how to fix this problem. Matthew Desmond’s "Poverty by America," Natalie Foster’s "The Guarantee," and Heather McGhee’s "The Sum of Us "are just a few recent examples of provocative and pathbreaking work. But every effort to start a sincere conversation on these topics gets shut down by politicians who’d prefer to activate and weaponize class, economic and racial divisions for their own gain.
I don’t know that I see more clearly on any of this than anyone else, and I am missing many lenses. I don’t presume to speak on behalf of the communities affected by the policies I write about, for instance – I can only do the best I can to bear witness. What I think I do have, though, is an inside perspective on the intersection of policy, politics and business. I’ve worked as a senior staffer on Capitol Hill, and I’ve worked in think tanks and at a nonprofit advocacy organization. I also spent six years as a corporate lawyer reading financial statements and learning corporate finance. One benefit of this scattershot career is that it helped me uncover what I call “Poverty, Inc.” in the book and to explain how it came about.
What does it mean to be poor in America?
The Census Bureau defines “poverty” solely as a measure of income – you’re “poor” if your household’s income falls below a certain level for any given year. We can all agree that’s way too narrow; you can’t reduce the experience of poverty to a dollar figure.
To be poor in America is to be denied a chance to fulfill your potential because you lack access to the opportunities that money can buy. It means the inability to meet your basic needs – food, housing, and health care – or having access only to substandard versions of what’s available to everyone else. It means the inability to develop your human potential because of the structural limitations around you – lousy schools and indifferent teachers, violence, and discrimination. Some people call it “surviving” versus “thriving,” which I think is a pretty good description of what it means to be poor.
What does the language of social science and public policy hide and/or obscure about poverty in America?
Social science research is meant to be objective. It’s supposed to be fact-based and logical so that policymakers take researchers’ conclusions seriously and formulate rational policies backed up by data. But the language of objectivity is also very objectifying. Take, for example, the tendency of academic researchers to use the acronym “LMI” for “low- and moderate-income.” Referring to people as “LMI households” sounds very clinical and detached and diminishes the humanity of the people defined this way.
There’s actually quite a bit of language in the discourse around poverty that is very “othering.” Even a reference to “the poor” lumps people with full lives and individual experiences into a single category defined solely by their income, and it becomes very easy to think of “the poor” as “them” versus “us.”
And then there’s language that carries implicit judgment, intended or not. A lot of research around program effectiveness, for instance, refers to “recipients,” which to me implies passivity and undeservedness.
What of lived experiences?
I think the world of social science and public policy is generally pretty sterile. There are “recipients” and “interventions” – meaning government programs – and no room for the complexity of lived experience. I’m not sure how current discourse can accommodate the reality of lived experience fairly and completely, but the failure to even acknowledge this dimension means all research is incomplete.
What does it mean to be “working poor?” Moreover, many if not most Americans who consider themselves “working class” or “middle class” are closer to actual poverty than they would ever admit or want to realize.
You make a good point that many Americans perceive themselves – or want to perceive themselves – as better off than they really are. According to an April 2024 survey by the National Endowment for Financial Education, for example, 68 percent of Americans rate the “current quality of their financial life” as “better than expected” or “about as expected.”
Nobody wants to admit they are struggling or, worse yet, that they are members of the stigmatized “poor.” In a society that equates success with money, poverty is failure.
The same goes for being “working poor.” Working gains you some measure of respect compared to the so-called “idle poor,” whom Elizabethan and colonial “poor laws” considered “unworthy” of help. But I think most people see “working poor” as a rung below “working class” – even if in reality the financial condition of people in both groups overlap. To be “working class” implies you have a steady job that demands skills, if not a college education. “Working poor,” on the other hand, implies you’re unskilled labor, maybe working in fast food or as a janitor. “Working class” implies the potential for upward mobility; “working poor” implies stagnation and struggle. I know I’m trafficking in stereotypes, but I think that’s how most Americans think about who is “deserving” of government help.
There is the repeated finding that many Americans identify as “middle class” regardless of income or wealth. First, is that still true? Second, what does that mean in terms of politics and the way our society deals with poverty and the poor?
Gallup just put out a survey finding that 54 percent of Americans identify as “middle class,” including 15 percent who say they are “upper middle class.” Just 12 percent, in contrast, call themselves “lower class.” The poll doesn’t correlate people’s answers with their actual financial circumstances, and there isn’t an official, government definition of “middle class.”
But it’s a pretty safe bet, as you posit, that many people who call themselves “middle class” don’t enjoy middle class security. Earlier this year, a Washington Post analysis found that only about a third of Americans meet all six hallmarks of what they defined as a “middle-class lifestyle,” including a steady job, health insurance, savings, the ability to afford emergency expenses and pay bills on time and the means for a comfortable retirement.
But as alluded to above, people identify as “middle class” not because it’s an accurate descriptor of their financial condition but because the term reflects a preferred set of norms for behavior, thought, and a minimum standard of living. A few years back, researchers at the Brookings Institution put out a really fascinating report on how to define the middle class through different lenses, including as a purely cultural construct. In their analysis, the researchers quoted a 2010 report by the US Commerce Department that defined the middle class as much by its aspirations as its achievements: They “strive for economic stability,” “are forward-looking,” and “must work, plan ahead and save for the future.” According to this Commerce Department report, “being middle class may be as much about setting goals and working to achieve them as it is about their attainment.”
So, when you look at middle class identity this way – as a value system - you’re absolutely right that people’s self-identification with the “middle class” is hugely consequential for politics and the treatment of poverty. Politicians pander to the middle class because that’s the group that “works hard and plays by the rules,” to borrow President Bill Clinton’s formulation, and they are the ones that embody American virtues and the American dream.
This means, by implication, that people not in the middle class – i.e. the poor – live outside this value system. They’ve presumably rejected the middle-class ethos and therefore also “deserve” to be excluded, marginalized and scapegoated – which is exactly what many politicians do.
So much of politics is about reinforcing people’s sense of identity. And one strategy some politicians use to make their base feel good is to elevate their membership in an “in” group (e.g., “the middle class”) while demonizing an “out” group (e.g. “the poor”).
What does it mean to be “a problem," to borrow the language that is often used to describe Black folks and the color line? In this context, what does it mean to be a poor person in America, and to be viewed as a member of a class that is a problem to be solved?
First of all, viewing poverty and poor people as a “problem” to be solved limits the solutions on the table. It’s a very deficit-focused perspective, and the goal becomes eliminating the problem versus identifying and building on strengths. As a result, a lot of human potential gets overlooked. Poor people and communities are something to be “dealt with” rather than developed. (The “asset-based community development movement” is a fascinating counter-approach to this kind of thinking.)
Second, the framing of poverty as a “problem” leads far too easily to analyses of poverty as the consequence of individual behavior rather than systemic barriers. Daniel Patrick Moynihan’s 1965 report helped cement this viewpoint – he popularized the idea of a “culture of poverty” and bemoaned the “tangle of pathology” in low-income Black communities.
There’s so much wrong with his analysis that it’s hard to know where to begin. It’s focused on behaviors, not on systems. It’s dehumanizing, limiting and pessimistic. Moynihan assumes, for example, that everyone raised in a destructive environment will succumb to it, and he doesn’t perceive anyone’s potential for rising above their circumstances, which so many people obviously have done. It’s hard to overstate, however, how influential this report has been in shaping policymakers’ perceptions of poverty and of Americans who are poor.
Who profits from poverty in America?
In "Poverty, By America," Matthew Desmond argues that all non-poor Americans profit from poverty because our well-being has been achieved at the expense of people at the bottom of the ladder. Products and services are cheap, for instance, because someone else’s wages are low.
My book drills down on a narrower aspect of this question to look at the businesses that profit directly from poverty, either as government contractors paid to deliver social services or as “poverty entrepreneurs” exploiting government programs. The federal government spends at least $900 billion a year on programs that directly or disproportionately impact low-income Americans, so there’s a lot of profit to be made.
Some industries, for instance, make their money by getting a cut of the government aid that low-income Americans receive. The paid tax prep industry, for instance, charges low-income taxpayers hundreds of dollars to file returns and to issue predatory “refund advance” products that are basically payday loans. Many low-income taxpayers are eligible for the federal Earned Income Tax Credit (EITC), which returned $57 billion to families in 2023 — a fat target for tax preparers. The fees they charge are deducted from people’s refunds, which for EITC filers averaged $2,541 last year.
Another category of poverty industrialists are the contractors hired by governments to deliver social services. This includes companies like the Management & Training Corporation, which runs 20 federal Job Corps centers for low-income young adults across the country, as well as detention centers, prisons, halfway houses and prison medical departments. It’s a private company, so there’s no public information available about its revenues or operations (despite the fact that it’s basically taxpayer-supported through government contracts). There are hundreds of these contractors, large and small, and some of them are running a state’s entire welfare or Medicaid system, including the calculation of benefits and eligibility – decisions you’d expect government workers to make. These contractors often deliver subpar services, and many of them have been targets of audits, investigations and claims of outright fraud.
And then there’s a third category of industries whose business model depends on the consequences of persistent poverty. The dialysis industry, for example, makes most of its money from Medicare, which guarantees coverage for patients with kidney failure. Kidney disease disproportionately strikes low-income and minority patients, the result of decades of inequitable access to quality health care, nutrition and other factors. If you map dialysis centers, you’ll see them clustered in low-income communities because that’s where their markets are. I write in the book about the terrible toll that dialysis takes on patients, along with some of the industry’s questionable practices to maximize its profits.
Reading your book, I kept thinking of the folk wisdom that the money is in the disease and not in the cure.
Yes, I think that’s right! As I noted above, the federal government spends a lot every year on social services, as do states. All of that money is a very attractive target for poverty profiteers.
It’s also definitely in the business interest of the poverty industry for poverty to persist, and my book documents a bunch of ways in which poverty-dependent industries lobby to preserve their markets, both in Congress and in the states. Private prison companies, for instance, have worked hard to get more “customers” within their walls. They’ve endorsed harsh sentencing laws, like mandatory minimums and the treatment of juveniles like adults. Some prison companies have also negotiated “lockup quotas” to guarantee revenues, according to a blockbuster 2013 expose by the nonprofit In the Public Interest. In Arizona, for example, the state has to guarantee 100 percent occupancy under some of its prison contracts — a pretty obvious incentive for mass incarceration.
Likewise, the tax prep industry has spent millions fighting efforts to simplify the tax code or to provide lower-income taxpayers with free filing options through the IRS. In 2017, ProPublica published an investigation describing how the tax prep industry lobbied for legislation to permanently bar the federal government from offering free pre-filled returns.
Sad to say, less poverty poses an existential threat to many of the players in Poverty, Inc., which is why they invest so much in maintaining the status quo.
