A tax cut refers to a reduction in the amount of taxes that individuals or businesses are required to pay to the government. This can occur through lower tax rates, increased deductions, or credits, which ultimately leave taxpayers with more disposable income. Tax cuts are often implemented to stimulate economic growth by encouraging spending and investment. Governments may introduce tax cuts as part of fiscal policy to boost the economy during downturns or to promote specific sectors. For example, a government might reduce taxes for small businesses to encourage job creation and innovation.