Most economists believe that consumer spending decisions follow the general criteria established in life cycle and permanent income theories, two closely related hypotheses that, in the rest of this article, are treated as a single theory. This theory holds that consumers want to maintain a path of spending growth over their lifetime. Therefore, consumers will be reluctant to increase or reduce spending in response to a change in income unless they believe that the change in income will persist. The simplified formulation of this idea is that spending responds to changes in “permanent” income. Applying this theory to tax changes, we conclude that consumers will be more likely to change their spending behavior if they perceive that a tax change will be long-lasting. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay For example, a reduction in income tax rates or an increase in personal exemptions permanently inserted into the tax code should have a greater effect on consumer spending than a temporary reduction in rates or an increase in exemptions. Another component of the theory that impacts tax changes and spending is the premise that consumers are forward-looking. This premise suggests that consumers not only distinguish permanent from temporary tax changes, but also anticipate the impact of a tax change on their incomes even before it takes effect. Therefore, consumers may begin to adjust their spending immediately after a tax change becomes law, or even as the contours of the change begin to emerge – developments that can occur long before the change actually begins to impact tax payments. Indeed, if consumers take a long-term view, changes in the legal structure of tax liabilities should influence their spending decisions more than changes in the timing of tax payments. After all, a shift in the structure of annual liabilities would be expected to have a greater effect on permanent after-tax income than a revision of withholding schedules or a change in requirements for no quarterly tax withholding payments . of the recommendations for business taxation proposes abolishing the current system of corporate rates and replacing it with a system of land value taxation, thus replacing one of the most distortive taxes in the current system with a neutral and efficient tax. Business rates are not a good tax, they discriminate between different types of businesses, and they disincentivize the development of commercial properties. Our second proposal concerns the treatment of small businesses and self-employment. The current system distorts the choices on the organizational form, which are on the one hand the choice between subordinate and self-employed work, on the other the choice between managing an enterprise without legal personality or a small business, as well as decisions on the form of remuneration . For example, the sole owner of a small business pays himself or herself in the form of salary or dividends. These discrepancies are unfair and lack clear justification. The difference between the corporate tax rates paid by companies with higher profits and those with lower profits also lacks convincing justification. Our recommendations would align the taxation of income from employment and self-employment, increasing the NICs paid by self-employed workers to match those paid by employers.