Ghetto tax


A ghetto tax is the phenomenon of people with low incomes, particularly those living in poverty-stricken areas, paying higher prices for goods and services.

Economic principles

A ghetto tax is not literally a tax. It is a situation in which people pay higher costs for equivalent goods or services simply because they are poor or live in a poor area. A paper by the Brookings Institution, titled From Poverty, Opportunity: Putting the Market to Work for Lower Income Families, is widely cited as a study into ghetto taxes, although the report itself does not use the term.
The problem of ghetto taxes is closely associated with mobility; one study in the United States showed that higher prices might be prevalent in some neighbourhoods, but people with access to a car would have more access to affordable goods and services elsewhere, whilst those without a car would bear the brunt of higher local prices.

Examples