3 groups most effected by the fiscal cliff.

Yet another day without a deal, and another day closer to the fiscal cliff. You may think that you aren’t going to be affected by our “leaders” inability to come to a compromise over what to do regarding the expiring tax reductions and other items that make up the so called “fiscal cliff”, but you’d be dead wrong.

In a recent article on MoneyNing, they make the argument that the groups poised to feel the effects of a dive over the fiscal cliff, is not the 1%, but is actually those who are working hard and struggling to just get up the first few rungs.

Here are the 3 groups that are poised to be hit the hardest:

1) Job Seekers And The Unemployed.

If we do go over the cliff, we will undoubtedly see a reduction in hiring across the board.  This includes both private sector jobs as well as government cut-backs.  Further, it is estimated that we will see a huge 0.5% economic contraction by even the most conservative estimates.

In plain english, this means that if you thought it was difficult to find a job now, just wait until there is a contraction in the economy rather than the snail’s pace growth that we are currently experiencing.  This type of melt-down, may just make the “great recession” of 2008-2010 look like a party.

2) Low Income Families.

This segment will be hit extremely hard as the Earned Income Tax Credit (EITC) will be either entirely eliminated or reduced dramatically.

Currently, families earning less than $19,190 earn a tax credit of $475, even with no children, while a family with three eligible children receives a credit of $5,891 assuming an income of less than $50,270 per year.  Currently the law is structured in such a way that even if you have no tax liability, but meet the other requirements you are still entitled to take advantage of the credit and will even receive a check for that amount from the government.

This reduction or elimination, along with the roll-back of the social security tax break of 2%, will undoubtedly mean tougher times ahead for those struggling to improve.

3) Families With Children In College

Another break that will expire unless a compromise is reached is the American Opportunity Tax Credit (AOTC) which allows families earning less than $100,000 per year to deduct as much as $2500 per child in college for related school expenditures.

While the American Opportunity Tax Credit will expire, there is still the Hope Credit which does allow a $1800 tax break, however, that $700 difference will have to be made up for out of pocket, and the credit is only valid for 2 years versus the 4 year allowance of the AOTC.

While it may be easy to tune out the talking heads on the news channels regarding the fiscal cliff, just looking at the impact of these three issues should stir you up as you recognize the devastating impact that will be felt in your own pocket should a compromise not be reached.  We encourage all of our readers to take action, not just in the comments below, but by emailing, Facebook messaging, and calling your local representatives to tell them to reach an agreement that does not let this happen.

Make sure to leave your comments below, and share this article with all of your social networks to ensure that we spread the message of how devastating the non-action in Washington is going to be.

About Anthony Candella

Anthony is the founder and Directing Attorney of YourCreditAttorney.com and has been helping consumers just like you understand and improve your credit and financial situation since 2003.