According to a new analysis of the Bush's tax cuts by the Treasury Department, making certain cuts permanent will boost America's economy for the long-term.

The report, "A Dynamic Analysis of Permanent Extension of the President's Tax Relief," studied the long-term economic effect of several situations, including: lower tax rates on ordinary income; lower tax rates on dividends and capital gains; the 10% individual income tax rate bracket; the doubling of the child tax credit; and reduced marriage tax penalties.

The report found that the GDP (gross domestic product) of the US could grow by an additional 0.7% per year after 2016, if the studied tax cuts were made permanent.

The Treasury estimated that the lower rates on capital gains and dividends would only boost the output by 0.4%. These tax cuts have historically been credited by the administration as helping to sustain economic growth, by boosting investments and stimulating job growth.

The report showed that the largest boost to the economy would actually come from lowering personal tax rates, which is estimated to produce a 1.1% boost in the economy.

The study did acknowledge that several tax cuts passed during Bush's presidency would lead to a reduction in the rate of growth if made permanent. These include the increased child tax credit, the reduced marriage penalty and the 10% lower-income tax bracket. Analysists concluded that the above breaks would cut the annual economic growth of the nation by 0.7%.

Under current legislation, the studied tax cuts are set to expire at the end of 2010. Bush has made their permancy a priority for his second term.

The Treasury Department concluded that there is evidence that lower taxes will benefit the economy.

"Lower tax rates enable workers to keep more of their earnings, which increases work effort and labor force participation. The lower tax rates also enable innovative and risk-taking entrepreneurs to keep more of what they earn, which further encourages their entrepreneurial activity," said the report.

"All of these policies increase incentives to work, save and invest by reducing the distorting effects of taxes. Capital investment and labor productivity will thus be higher, which means higher output and living standards in the long run," it continued.

The Treasury report is a Bush administration initiative. It's purpose is to outline the economic benefits and pitfalls of the government's tax policy. The Treasury says that dynamic analysis provides a comprehensive and complete approach to the analysis of tax policy, by including the effects on the overall size of the economy and other major macroeconomic variables.

Critics argue that dynamic scoring is speculative and ignores the impact of tax cuts on revenues and government spending.