So cutting the tax rate, according to this story, will bring in lots of capital from abroad. This will drive the rate of return down and wages up, so that in the long run the benefits of the tax cut will flow to workers rather than shareholders.

Even if this story were right, long run effects aren’t the whole story for policy – in the long run, we are all dead, and meanwhile capital owners have a chance to take the money and run. So even if the eventual effect of the tax cut were to raise wages, there might well be years, even decades, when a tax cut for corporations is mainly a tax cut for wealthy shareholders.

And as Figure 2 shows, so far there has been no visible effect on wages. All those stories about worker bonuses were essentially bogus; real wages of ordinary workers are slightly lower than they were a year ago, while after-tax profits are way up.