What Ro Khanna Gets Wrong About the Economy

Corporate taxes, immigration and industrial policy

Letter to The WSJ. 

"Rep. Ro Khanna is wrong about corporate taxation (“How I Differ With J.D. Vance,” op-ed, Aug. 17). “Massive corporate tax cuts for Apple and General Electric result in stock buybacks and do nothing to encourage investment in Johnstown or Youngstown,” he claims. This familiar bit of rhetoric is devoid of economic reasoning.

A corporation is one way to organize capital. Taxing capital makes capital formation more expensive, and the burden falls on three parties. The first is consumers, who experience higher prices. Owners are second, because they see lower returns. Last are workers, whose wages are depressed when productivity falls.

I wager Rep. Khanna is most concerned about workers. He should know that recent studies find labor bears between 30% and 70% of the costs of corporate income taxes. This is because capital is usually more mobile than labor, as he acknowledges in his laments about a dearth of “investment in Johnstown or Youngstown.”

Mr. Khanna doubtless has the best of intentions. But his argument about corporate taxes is uninformed by the science of scarcity and trade-offs. As a result, he is more likely to hurt the struggling workers he wishes to help.

Prof. Alexander William Salter

Rawls College of Business, Texas Tech

Lubbock, Texas"