The effects of a tax cut depend on the type of tax that is cut. Policies that increase disposable income for lower- and middle-income households are more likely to increase overall consumption and "hence stimulate the economy". Tax cuts in isolation may boost the economy because they increase government borrowing. However, they are often accompanied by spending cuts or changes in monetary policy that can offset their stimulative effects.

Sometimes a tax cut can increase tax revenue, as economist Thomas Sowell