NEW YORK (CNNMoney.com) -- The White House Tuesday slashed its 2006 budget deficit forecast to $296 billion from $423 billion, and President Bush cited the numbers as evidence that his tax cuts were bolstering the world's largest economy.

The reduction came largely from higher-than-expected tax receipts, and the president and other supporters of the 2001 and 2003 tax cuts said the revision was a clear sign the cuts were pushing tax revenue up due to solid economic growth.

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But some budget experts said the impact of the tax cuts on the deficit reduction is overstated - and that long-term budget problems still loom for the United States.

"These tax cuts left nearly $1.1 trillion in the hands of American workers and families and small-business owners," Bush said in remarks about the new forecast. "And they used this money to help fuel an economic resurgence that's now in its 18th straight quarter of growth. The tax cuts we passed work."

The government took in nearly 13 percent more tax revenue in the first 9 months of this fiscal year than in the same period of 2005, according to the latest estimates in a separate report from the Congressional Budget Office.

That jump in tax revenue is the second highest in the past 25 years. Corporate income tax receipts rose 26 percent, while individual income tax receipts climbed 14 percent, with the strongest growth coming from so-called non-withheld taxes such as bonuses in the form of stock grants, capital gains on investments and estimated taxes.

The strong rise in corporate income tax was due to exceptionally strong profits and also most probably a one-year tax break for companies investing abroad that repatriated their earnings, said Standard & Poor's chief economist David Wyss.

The growth in tax receipts may have been unexpectedly high in part due to artificially low expectations, Wyss said, noting that for the past three years the White House has underestimated tax revenue by $100 billion.

The liberal Center on Budget Policy and Priorities noted that tax receipts also can rise more than expected in the wake of tax increases during economic recovery periods, as they did in the 1990s.

"Tax cut or tax increase is not that big a deal on the economy," Wyss said, noting that the cost of the tax cuts this year is estimated to be $200 billion, or less than 2 percent of GDP. "But deficits hurt GDP." (See correction.)

The Concord Coalition, a nonpartisan fiscal policy watchdog, notes that the interest on U.S. debt is the fastest growing category of government spending.

While Wyss favored the 2001 tax cuts because the post-9/11 economy needed the short-term stimulus, he believes the 2003 cuts went too far because they weren't countered with a reduction in spending.

Taken alone, the 2006 deficit - which Wyss and other economists predict will end up being about $280 billion, down from the $318 billion recorded in 2005 - isn't a problem for the economy per se and is on par with the median level of deficits relative to GDP since 1959, he said. "The problem is what happens next."

Next is the compounding of that deficit due to an explosion in entitlement spending on Medicare and Social Security, which is expected to start after 2008, when the first big wave of Baby Boomers retire.

And that larger deficit will have to be addressed either by higher taxes, reduced spending or both.

The Center on Budget Policy noted that while a reduction in the deficit is always welcome, the 2006 reduction isn't going to change the long-term fiscal outlook.

Wyss said the shortfall in the budget between where the economy is today and where the White House forecasted it would be in its pre-9/11 projections -- when it predicted a $600 billion budget surplus for 2006 -- is close to $1 trillion.

The tax cuts account for about $250 billion of that shortfall, he said. Spending on the war in Iraq, homeland security and Hurricane Katrina relief account for $150 billion. Another $250 billion went to other federal spending, including the new Medicare Part D prescription drug program.

And about $200 billion of the decline is the result of lower-than-expected investment-related tax revenue, which resulted from the Internet stock bubble bursting and a weakened stock market.

Correction: An earlier version of this article incorrectly stated that the cost of the tax cuts this year is estimated to be less than 1 percent of GDP. CNNMoney.com regrets the error. (Return to story.)

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