Abstract
Fiscal cliff” is the popular shorthand term used to describe the challenge that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. The deficit which is the difference between what the government takes in and what it spends is expected to be reduced by roughly half beginning in the first days of 2013. This sharp decrease in the deficit in such a short period of time is known as the fiscal cliff.

2012 is the year the world is supposed to end, but it won’t happen on December 21st. For Americans it will be on December 31st. We don’t need a Mayan calendar to tell us that we’re heading towards doom; all we have to do is watch the TV or use the internet and read about the fiscal cliff. Almost all Americans will take a financial blow next year and low income families would be among the hardest hit, if the White House and Congress fail to solve the “fiscal cliff” of big tax increases and spending cuts set to start January 2nd. With the rise in payroll-tax increases, Expiration of the Bush tax cuts decreases in the Child Tax Credit, and the Dividend-Tax Increases, a middle-class family would be hit the hardest. According to Matthews, “For instance, if a couple together makes $82,000 and have four children and pay child care and even though money was tight were able to invest in $10,000 worth of blue-chip, dividend-paying stocks, in addition to socking away money in their 401(k)s; their taxes would go up $530 a month, or more than $6,000 a year.
The Bush Tax Cuts have generated income, dividends and long term capital gains for the Americans and has been serving the purpose of providing an incentive to the American corporations to expand operations. Under the old scheme of number of tax benefits were also offered like the child tax credit. Thus with the withdrawal of these