> they get a big paycheck once a year to pay off whatever
If you have something big to pay off, you usually need to do it right away. You probably can't afford to wait however many months until you get your refund.
And if tax withholding laws changed to err on the side of under-withholding for poor people, those people would disproportionately fail to be able to pay their taxes when the time comes.
Most people can't budget, poor people especially so (it's among the biggest and most likely reasons why they are poor). They see money, they spend it all immediately. Saving? Investing? "roflmao" or "I can't.", they will say. The only way to address this so certain, specific, important payments are made absolutely is to literally take and keep the money out of the person's hands until the payment is made.
When income is 80% of the minimal bills, which dollars are the fun ones?
> But anyone who has actually dealt with poor people who live paycheck to paycheck knows they are not good at budgeting and planning.
You may not know that assertion is uneducated nonsense. The nonsensical part is the inference that better budgeting is all that stands between 80% of minimal bills and 105%.
Past that, an extended time in hunger-level poverty tends to lead to some hyper-focused money management. As in being intimately aware of each penny that hopefully will add up to this weeks bag of white rice.
Not sure I'm explaining that properly, but it was the sort of math I encountered dealing with such individuals.
There is also a general pattern of spending "extra" money on things like parties, experiences, consumables, etc. Better to spend the money on a pizza party and gocart trip for their kids than to stash it away in a savings account. Better to spend the money on beer for a party than even to hide it under their mattress.
However, giving the government an automatic loan means that a land lord cannot charge that much more in rent, and the owner does get to spend it eventually, rather than throwing it into a rent pit
This is false. You simply aren't going to be able to budget your way into riches if you don't have enough money to go around. If you don't believe me, limit yourself to a minimum wage budget with no startup savings (and no borrowing off of others) and tell me how you are doing in a year... and then tell me how you'd survive the next few years on this. If minimum wage is too little, try setting the income at just over the mark you'd have for assistance.
Alternatively, if you have enough money to cover reasonable expenses, some fun, and have a little leftover, you don't really have to budget if you don't tend to spend lots. If I have enough money, I don't really have to budget.
You are insultingly out of touch.
I'd like to paint you my picture of my life in 2009 and then compare it to today's numbers.
I was making $10.75/hr at a Subway, working ~38 hours/week. That's ~$1600 pretax, about $1,200 post-tax. Expenses:
Rent (Single-bedroom apartment): 650 car insurance: 75 water/sewage/garbage: 40 internet: 30 phone: 30 electricity: 50
That left me with $325/month to pay for gas (luckily I loved only ~3 miles from work, so that didn't cost me much), food, and entertainment. $10/day for food wasn't terrible, but it's not exactly steak and seafood, either. And remember, that $10/day is supposed to include entertainment as well. Honestly, it wasn't really THAT bad. Buuuuut....
Minimum wage increases have happened, but rent has gone up too. That job would now pay $15/hr, ($2280 for 38 hours pretax, ~$1710 post-tax), but the rent on that exact same unit is now $1,200/month.
Assuming all other bills remained the same (they wouldn't), I'd now be left with only $285/month for food. And with over 15 years of inflation, that $285 is worth significantly less.
At that point, even with budgeting, I'd still be living paycheck-to-paycheck. When wages don't keep up with the cost of living, you can't budget your way out of it.
To make it worse, that kind of living starts to take its toll on mental health. You feel like you're constantly drowning. That $4 coffee or the meal at Taco Bell will be your only source of real joy between each paycheck.
Whether you have the willpower to not touch it instead of increasing your food budget from $10 to $11 or whatever is a different story, and speaks to the mentality: if you never got the money in the first place, you can't be tempted to spend it.
A 1040 + W2 might the only equation these people need to solve for.