President Biden is proposing to finance his infrastructure spending proposal by increasing the corporate income tax rate from 21 percent to 28 percent. What difference will that make?

If there is one thing that virtually all economists are united about, it is this: corporations don’t pay the corporate income tax.

Why is that? A corporation is not a person. It is a relationship—a relationship between workers, managers, stockholders, consumers and others. You can tax relationships. But relationships don’t pay taxes.

The sales tax, for example, taxes a relationship between buyer and seller. But sales don’t pay taxes. People do. The burden of the sales tax must fall on the buyer, the seller or both. In competitive markets, economists think the full burden falls on the buyer. This conclusion makes sense to most people because they see the tax nominally added to the prices of the goods they buy at the cash register.

But what we see with our own eyes isn’t necessarily good economics. Take the payroll tax. This is a tax on wages. But wages don’t pay taxes. The burden must fall on the buyer (the employer) or the seller (the worker) or both. In practice (and by law), half the tax is deducted from the worker’s wages and the employer sends a check for the whole amount to the government. So, it looks like the worker is paying half and the employer is paying half.

However, careful studies by economists over many years show this is not the case. The burden of the tax is not determined by who writes the check to the government. It is determined by how the market adjusts to the tax. In this case the evidence is quite convincing: the full burden falls on the workers. That means that for every dollar of payroll tax the government collects, workers’ pay will be a dollar lower than it otherwise would be.

With all this in mind, let’s turn to the corporate income tax. Who pays it? When all adjustments are said and done there are several candidates, including consumers, workers and stockholders. How is the burden distributed among those three groups?

The surprising answer is that economists don’t know.

That’s an answer that should give pause to all progressives. There is something very unprogressive about advocating a tax without knowing who actually pays it.

An earlier generation of progressives understood this very well. Under the leadership of such liberal economists as John Kenneth Galbraith, the Americans for Democratic Action (ADA) set the left-of-center policy agenda for decades. Their early position on the corporate income tax: abolish it and tax shareholders on their share of corporate earnings.

Of course, in those days most shareholders paid income taxes. Today, shares of stock are often owned by entities (or financial vehicles) that don’t pay income taxes—including IRAs, 410(k) plans, pension funds and nonprofit organizations. Foreign owners of stock pay a dividend tax, but they don’t pay U.S. capital gains taxes. In fact, today only 24 percent of shareholders are fully taxed.

Some economists are forced to give their best estimate on who pays the corporate income tax because it is required by the nature of the work they do. The Tax Policy Center (a joint venture of the Urban Institute and the Brookings Institution), for example, estimates that 20 percent of the corporate income tax is paid by labor. The Congressional Budget Office (CBO) puts the worker’s burden at 25 percent.

Since the Tax Policy Center leans left and the CBO is the score-keeper for Congress, these estimates have to be taken seriously. Joe Biden may say that raising the corporate income tax rate from 21 percent to 28 percent will not result in a tax on anyone earning less than $400,000. But when members of Congress vote for the measure, they will be instructed by the CBO that they are voting to take one out of every four dollars of increased government revenue out of the pockets of ordinary American workers.

Bad as that sounds, the reality could be much worse. It’s possible that the entire burden of the corporate income tax falls on labor. How could that happen? Imagine that the rate of return on capital (adjusted for risk) is determined in the international capital market. Beginning in equilibrium, suppose the United States imposes a tax on corporate earnings. Since this lowers the return on capital invested in the U.S., capital tends to flow out of our country to other countries, where the rate of return is now higher.

The most important factor determining a country’s average wage is the amount of physical capital to combine with it. As financial capital flows out of the country, there will be less physical capital than there otherwise would be. (Companies will buy fewer factories, fewer machines, fewer structures, etc.) As financial capital becomes scarcer, its rate of return begins to rise and continues to do so until it reaches the previous international average.

In the new equilibrium, the rate of return on capital will be exactly as it was before the tax. But because there is less physical capital than there otherwise would be, wages will be lower than they otherwise would be. In this way, the entire burden of the tax ultimately falls on labor.

What does the evidence show? The most sophisticated model of international capital flows ever developed has been produced by Boston University economist Laurence Kotlikoff and his colleagues. (Full disclosure: my own organization helped fund the model’s development.) The model took three years to develop and it’s being continuously updated. It has 3½ million equations. It takes several computers operating up to 6 hours to do a single run.

Based on the findings of the model, Laurence Kotlikoff and his colleagues published a seminal study at the NBER Working Paper site in 2014. The study found that international capital flows are very sensitive to corporate taxation and wages are very sensitive to the amount of capital available. This finding applies not just to this country, but everywhere else around the world.

Based on the study, Kotlikoff wrote a column for the New York Times NYT -0.3% arguing that the surest way to raise the wages of the American worker is to abolish the corporate income tax. Alternatively, a sure way to lower wages and reduce family income is to tax corporate earnings.

If Kotlikoff and his colleagues are right, then almost all of the revenue designated so far to fund the Biden infrastructure spending bill will come out of the pockets of people who make less than $400,000 a year.