At one level it’s hard to take the Trump administration’s tax “reform” push seriously. A guy gets elected as a populist and his first two big proposals are (a) taking away health insurance from millions (b) cutting corporate taxes. Wow.

Furthermore, Trump is invincibly ignorant on taxes (and everything else) — he keeps declaring that America is the highest taxed nation in the world, which is nearly the opposite of the truth among advanced countries. And his allies in Congress aren’t ignorant, but they’re liars: Paul Ryan is the master of mystery meat, of promising to raise and save trillions in unspecified ways.

But there is an actual interesting question here, even if we shouldn’t give any credence to Republican answers. Who does, in fact, pay the corporate profit tax? Does it fall on corporations, and hence eventually on their shareholders? Or is the ultimate incidence mainly on wages, as the administration claims?

There have been some very good discussions of this issue by CBO, here and here.

CBO is skeptical of cross-country regressions that seem to suggest that much of the burden falls on wages. I agree, on general principles. In most cases it’s just too difficult to control for other factors. The only times I take cross-country results seriously is when there’s really drastic differential behavior of a factor likely to have large effects, like the huge differences in the degree of fiscal austerity between 2009-2013. Trying to tease out the effects of corporate taxation, which doesn’t differ all that much among OECD countries and is surely not the most important driver of wage differences, looks hopeless.

The alternative is some kind of structural story; and I think there’s an important point here, already made by CBO but in need of more emphasis: we really need to think about monopoly rents.

The usual way this story is told thinks of the corporate tax as a tax on returns to physical capital. The story then says that back in the old days, when capital mobility between countries was limited, domestic corporations really had no way to avoid the tax, so it did indeed fall on shareholders. But now, so the tale goes, we have highly mobile capital; if you tax it in any one country, it will flow out, making capital scarcer and driving down wages, until after-tax rates of return in that country have risen back to the world average.

There are important qualifications to this story even as given. For one thing, capital mobility remains far from perfect: the Feldstein Horioka correlation between domestic savings and domestic investment has weakened, but it’s still there. For another, the US is a big country, able to affect world rates of return. One more thing: given the size of the US, cuts in our corporate taxes might well induce competitive cuts in other countries, further reducing the impact on wages here.

But what caught my eye from the CBO was a quite different point: much corporate taxation probably doesn’t fall on returns to physical capital, but rather on monopoly rents. It doesn’t matter whether these rents were fairly earned through, say, investment in technology, or even whether the corporations earn super-high profits. As long as the local source of profit is some kind of monopoly rent, corporate tax incidence is going to fall on shareholders, not workers.

Imagine a world in which all corporations are like Google or Apple: they invest resources in developing new products, then sell those products — in which they have a lot of market power — in various countries for well above production cost, which is the source of their profits. Cutting the tax rate on such profits won’t make them employ more people, driving up the demand for labor and hence wages; it will just let them keep more of their rents.

A parallel: think of pharma, where companies develop a drug then sell it worldwide. Some countries use the bargaining power of their government health systems to get lower prices, some (mostly us) don’t; the countries that bargain for lower prices don’t pay any price in reduced access to drugs. Similarly, if you place a tax on profits earned from technological monopolies, you won’t lose access to the technology, you’ll just collect more taxes.

And there’s a lot of reason to believe that market power is an increasingly big deal. Again, this doesn’t have to be unfair, and it could involve monopolistic competition without a lot of excess returns. The point is that no matter what the source and justification for market power, that power undermines the case that capital mobility will mean that cutting corporate taxes benefits workers.

This changes the narrative, doesn’t it? Instead of focusing on rising capital mobility as a reason profits taxes might fall on workers, maybe we should focus on rising market power as a reason why profits taxes fall on capitalists.

The point for now is that when someone tells you that changes in the world have made old-style corporate taxes obsolete, be skeptical. Some changes in the world may have made profit taxation a better idea than ever.