To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®. July 25, 2006 A Dynamic Analysis of Permanent Executive Summary This Report presents a detailed description of Treasury's dynamic analysis of the President's proposal to permanently extend the tax relief provisions enacted in 2001 and 2003 that are currently set to expire at the end of 2010. These enacted provisions include: • Lower tax rates on ordinary income; The purpose of the report is to provide a more in-depth, transparent understanding of dynamic analysis, while also illustrating the positive contributions the tax relief, together with spending reductions, can be expected to continue to make to the Dynamic Analysis Dynamic analysis goes beyond traditional analysis of tax policy by focusing on the broad economic effects in both the short and long term. Simply, dynamic analysis provides a more comprehensive and complete approach to analyzing tax policy by including its effects on the overall size of the economy and other major macroeconomic variables. The President's FY 2007 Budget proposes to create a division of dynamic analysis within the Department of Treasury's Office of Tax Analysis. The Economic Benefits of Tax Relief As evidenced by key economic indicators such as increased capital investment and Gross Treasury has conducted its dynamic analysis using a model that accounts for the effects of this greater work effort, increase in savings and investment, and improved allocation of resources on the size of the economy. While this model captures many aspects of a modern economy and economic behavior, others are not reflected in the model. For example, the model assumes that resources are fully employed in the economy and that capital is only somewhat mobile internationally. These are areas for future development. REPORTS |
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