While financial mistakes are commonly associated with the younger population, those who have been around the block a few times know that financial issues can occur at any age. The impact of taxes and debt cannot be ignored in this regard. The resulting inequality affects the rich and the poor in vastly different ways.
Access To Wealth
When it comes to wealth inequality, it is all about having the proper level of access. The middle class in this country is shrinking rapidly and is being replaced with a large group of haves and have nots. The main reason for this discrepancy? Each group’s access (or lack thereof) to capital.
The lower class simply does not have the same access to wealth and to pretend otherwise would be disingenuous. Even something as simple as applying for a loan becomes more difficult for those who are poor. The decision is going to be based on their credit score and their assets.
From there, a bank is also going to have consider the fact that this applicant works for all the income that they generate. Those who are poor can spend their entire lives working hard and never manage to get ahead. Meanwhile, the rich are able to survive off of passive income and receive greater access to further financial assistance.
The Role That Taxes Play In Accruing Wealth
One of the most important lessons that is pounded in most people’s heads when they are young is one that will stick with them forever: life is not about how much money we make, it is how much money we are able to hold onto. Even those who are accustomed to earning a high income must internalize this lesson.
Those who earn the highest incomes are subjected to the highest level of taxes. However, an investor is able to sidestep these sorts of concerns. There are a multitude of tax write off codes that can be used. An investor is always going to come out further ahead than someone who is working for their income.
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Government tax breaks are always going to be more accessible to those who are providing homes and jobs. Nonprofit organizations also enjoy a wide range of tax benefits.
How Debt Is Used By The Wealthy
The wealthy are also able to utilize debt in a way that the poor cannot and this serves to create an even larger divide. Bank loans, government grants and private equity are available to the wealthy, even when they are experiencing debt. If a rich person owns a building that appreciates in value, they are able to borrow additional money.
The capital is then used to make further investments and this capital is provided without taxation because it qualifies as a loan. Meanwhile, lower income folks are forced to take on debt and do not have the same ability to leverage their financial interests.
Since they are also spending more than they make, they are forced to pay the costs of being poor in the form of insurance fees and bank loans. Credit card fees are also higher for those who are considered to be a high risk. More student loans are required for the lower class population as well.
The Effects on Secondary Education
Even something as simple as going to college is more difficult for those who are from low-income families. For starters, they are typically forced to attend state schools and reside at home because they do not have the means to live on campus. They will have to spend more money to commute to and from school each day.
These students do not have the luxury of spending all of their time on their studies, either. In most instances, they are going to have to hold down a full-time job while they are receiving their secondary education. Conversely, the wealthy are able to send their children to better schools and provide them with the means to focus solely on their studies.
At day’s end, it is all about access to capital. It is easier for the rich to concentrate when it comes time for their secondary education and get good grades when they do not have to worry about where their next meal is coming from. No one ever stops to think about the anxiety and stress that is associated with being poor and the damaging effects it can have on a person’s mental outlook.
As the gap in wealth continues to become more pronounced, everyone needs to make the proper considerations as to how they are accruing funds. How this money is going to be taxed will affect the amount that is kept and a concrete plan needs to be made, so that everyone is able to hold onto the largest possible percentage of their income.