There are many ideas and proposals out there for reducing poverty in urban areas. But as the New York Times reports, one of the most overlooked ways is reducing the higher costs of living -- sometimes called the “Ghetto Tax” -- that the urban poor have to pay compared to the middle class. These costs include car loans, auto insurance, “rent-to-own” appliances, checking-cashing interest rates, etc.:

Drivers from low-income neighborhoods of New York, Hartford, and Baltimore . . . paid $400 more on average for a year’s insurance. . . . The poor are also the main customers for appliances and furniture at “rent to own” stores, where payments are stretched out at very high interest rates; in Wisconsin, a $200 television can end up costing $700.

Those were just two examples among several cited in a report Tuesday showing that poor urban residents frequently pay hundreds if not thousands of dollars a year in extra costs for everyday necessities. The study said some of the disparities were due to real differences in the cost of doing business in poor areas, some to predatory financial practices and some to consumer ignorance.

The article stresses that part of the problem are predatory practices by businesses, but in addition, consumer ignorance among the poor is also a big contributing factor -- how they are not familiar with the true costs of buying from rent-to-own stores or using check-cashing services, and that there are alternatives available to them that are cheaper.

This just goes to show that poverty can be addressed in many different ways and that there is no one single solution to the problem. It makes you wonder though, why is it that we spend and devote so much time and attention to ideas on reducing poverty such as lower taxes, lowering health care costs, increasing child care, etc., but very little attention to things that relate to credit and financial practices that can be just as damaging to getting out of poverty?

Could it be that since we live in a capitalist society and economy, that anything that resembles government regulation of financial activities is immediately rejected and labeled as communism, and therefore, is automatically taboo?