these destitute people-sadly in todays day-need to dress nicer then others in order to avoid embarassment so that their friends & neighbors dont know that they are poor. this is also why “it’s mostly the poor people that make the fancy simchas” (i have been in the Simcha Business for many years) for the same reason.
they have no choice.
on another note: you asked why they think its right. i tell you that lots of people think their allowed to cause they feel like their paying taxes on lots of things etc… so we can take back this way. ITS WRONG & a big chillul Hashem