No no no no! Please don't cut it, it will ruin it. I have seen so many people think that gathers are created that way! Not at all, what you need to do, is pull the fabric up towards where it meets the waist and then pull it together at the side. Basically pinch the fabric below the waistband, pull up and then let it fold over itself creating a seam, when it does this pin it, you can sew it or leave it pinned depending on if you'd like to reuse the skirt for another costume or just to wear around without the gather.
The only time you'd need to cut a skirt is for a refitting (Making it tighter/adjusting the waist) to make it a high-low (Front is short, back is long) or to do general alterations to fit your form. For anything like gathering, or adding visual details cutting is almost never necessary.
Thankfully the alterations you have to make for Elizabeth are super simple (Thank the stars!) and there are multitudes of super detailed tutorials on how to make different gathers on skirts, but it's fairly simple and doesn't even require sewing. You can also glue it together.
Of you want to create the "fishbone" gather that Elizabeth in your photo has, just repeat the step by pulling it up little by little and pinning it each time, you have to be super careful with this because the length of the skirt will get away from you quickly. Hope this helps!
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