If labour and capital income are differently taxed however, then the redistribution
between factors matters. The return to capital must rise and the wage rate fall in order
to persuade producers to switch to a lower capital-labour ratio in production and
thereby employ the immigrating labour. If capital is more lightly taxed then this leads
to a decrease in revenue as factor returns shift towards the more lightly taxed factor.
Such effects are likely nonetheless to be small relative to the tax raised on immigrants’
labour income.3