Tax cuts refer to reductions in the amount of money that individuals or businesses are required to pay to the government. When tax rates are lowered, people have more disposable income, which can lead to increased spending and investment. This can stimulate the economy, as businesses may hire more workers or expand their operations due to higher consumer demand. Governments often implement tax cuts to encourage economic growth or to provide relief during tough financial times. For example, a government might reduce income tax rates to help families keep more of their earnings, or lower corporate taxes to incentivize businesses to invest in new projects.