The effect on real GDP of a $10 million tax cut is less than the effect of a $10 million increase in government spending because

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The effect on real GDP of a $10 million tax cut is less than the effect of a $10 million increase in government spending primarily because when consumers receive a tax cut, they do not spend all of their increased disposable income on domestic goods and services. Instead, they save a portion of it and spend another portion on imports, which does not contribute to the domestic GDP. This contrasts with government spending, which is fully injected into the economy, directly increasing demand for domestically produced goods and services.

The Effect on Real GDP of a $10 Million Tax