▁for . ▁In ▁the ▁dynamic ▁model , ▁we ▁may ▁rewrite ▁the ▁equation ▁for ▁changes ▁in ▁tax es ▁per ▁worker ▁with ▁respect ▁to ▁the ▁tax ▁rate ▁as : Rec alling ▁that ▁, ▁we ▁have ▁that : Using ▁the ▁C obb - D oug las ▁production ▁function , ▁we ▁have ▁that : There fore , ▁the ▁dynamic ▁effect ▁of ▁a ▁capital ▁tax ▁cut ▁on ▁w ages ▁is : If ▁we ▁take ▁, ▁then ▁the ▁dynamic ▁effect ▁of ▁lower ing ▁capital ▁tax es ▁on ▁w ages ▁will ▁be ▁even ▁larger ▁than ▁the ▁static ▁effect . ▁Moreover , ▁if ▁there ▁are ▁positive ▁external ities ▁to ▁capital ▁accum ulation , ▁the ▁effect ▁of ▁the ▁tax ▁cut ▁on ▁w ages ▁would ▁be ▁larger ▁than ▁in ▁the ▁model ▁we ▁just ▁derived . ▁It ▁is ▁important ▁to ▁note ▁that ▁the ▁result ▁is ▁a ▁combination ▁of : ▁▁ ▁The ▁standard ▁result ▁that ▁in ▁a ▁small ▁open ▁economy ▁labor ▁be ars ▁ 1 0 0 % ▁of ▁a ▁small ▁capital ▁income ▁tax ▁ ▁The ▁fact ▁that , ▁starting ▁at ▁a ▁positive ▁tax ▁rate , ▁the ▁bur den ▁of ▁a ▁tax ▁increase ▁exceed s ▁re venue ▁collection ▁due ▁to ▁the ▁first - order ▁dead weight ▁loss ▁ ▁This ▁result ▁showing ▁that , ▁under ▁certain ▁assumptions , ▁a ▁corpor ate ▁tax ▁cut ▁can ▁boost ▁the ▁w ages ▁of ▁workers ▁by ▁more ▁than ▁the ▁lost ▁re venue ▁does ▁not ▁imply ▁that ▁the ▁magnitude ▁is ▁correct . ▁ ▁R ather , ▁it ▁suggests ▁a ▁basis ▁for ▁policy ▁analysis ▁that ▁is ▁not ▁ground ed ▁in ▁hand w aving