ATCOR

All Taxes Come Out of Rent (ATCOR) is a central theory to Georgism. Similar previous theories were made by Adam Smith, John Locke, and the Physiocrats. In 1998, Mason Gaffney wrote the theory:

"The meaning and relevance of ATCOR is that when we lower other taxes, the revenue base is not lost, but shifted to land rents and values, which can then yield more taxes." 

Gaffney argues that ATCOR necessarily comes from a combination of land's inelastic supply, capital and labour's elastic supply, and observation of other taxes. 

Economic Principles
Land's inelastic supply
The first argument for ATCOR is that economic land is both finite and necessary to all economic activity. Land has an inelastic supply, but elastic demand. The supply of land is fixed, so cuts to taxes on labour, or capital, cause increases to the value of that land. This means that the income (and so value) of land absorbs income gained from tax cuts on capital or labour.

Elastic supply of capital and labour
The supply of labour can be affected by events like migration, shifts in the employment rate, and the availability of jobs. So, labour is highly elastic in supply, generally, in comparison to the absolutely inelastic supply of land. The elasticity of labour can be demonstrated in the Tiebout model.

The supply of capital is perfectly elastic, due to the real interest rate.

So, the revenue base does not disappear when taxes on capital and labour are cut. Most tax cuts cause land values to increase. 

Similar principles in other taxes
These principles can also be seen in other taxes. Examples are given by Gaffney:

Lowering the corporate income tax raises stock prices. Lowering interest rates raises real estate prices. Wartime taxes lower land prices, and peace dividends let them rise again. 

Criticism
Criticism of ATCOR is often criticism of its assumptions. One criticism is that labour and capital are not perfectly elastic, and that this assumption oversimplifies real world economics. Gaffney recognised this criticism, and said that "some of the revenue gains may be 'lost' in higher wage rates, but on the whole higher wage rates are socially desirable, and serve to lower many public costs" 

Some say also that ATCOR does not prove the Single Tax system based on land value would generate sufficient revenue to replace current tax systems. This is because of ideas of inefficiencies in the system (so not absolutely All Taxes Come Out of Rent).

References