Gaffney (2005): The Physiocratic Concept of ATCOR (All Taxes Come Out of Rent)

Overview

"The Physiocratic Concept of ATCOR (All Taxes Come Out of Rent)" is a 2005 working paper (WP096) by economist Mason Gaffney, excerpted from his longer notes on "Adequacy of Land as a Tax Base."[1] It is the source that coined and named the acronym ATCOR, distinguishing it from the closely related argument Gaffney had already made in The Corruption of Economics (1994) under the label "negative shifting."[1] The paper states the thesis directly: "when we lower other taxes, the revenue base is not lost, but shifted to land rents and values, which can then yield more taxes."[1]

Argument and Evidence

Gaffney illustrates the mechanism first with property-tax exemptions for buildings: when new buildings are exempted from tax and only land is taxed, builders and sellers bid more for land, so the same real estate is taxed "in a different way" — an effect he says has been observed historically in cities and regions including New York City, Chicago and San Francisco after their fires, and several Australian states.[1] He extends the logic to broader tax cuts — lower corporate income tax raising stock markets, "peace dividend" effects, and resource-boom revenue substitution — and traces the underlying idea to a "venerable tradition" running from the Physiocrats, John Locke, and Jacob Vanderlint through Adam Smith's remarks on the "indolence of landowners."[1] He grounds the thesis in two premises: that the after-tax return to capital is set by elastic world capital markets, and that labor supply is elastic given persistent unemployment and underemployment — so neither factor can permanently absorb a tax burden, leaving land rent as the residual bearer.[1]

Caveats Gaffney Himself Notes

Gaffney's own summary is qualified rather than absolute: he writes that "the major reservation is that the supply of labor is not totally elastic, so some of the revenue gains may be 'lost' in higher wage rates" — though he adds that higher wages are socially desirable in their own right.[1] He also catalogues economists who reject or qualify shifting-to-rent arguments, including E.R.A. Seligman ("There is no fund of capital floating in the air to be brought to earth by the magic touch of Mr. H.G.") and the "forward shifting" objection associated with Musgrave and Howard Jarvis's Proposition 13 arguments, which he argues rest on assuming a tax confined to one land use in one small jurisdiction rather than a general shift to land value taxation.[1]

Standing and Limits

This is a working paper published on Gaffney's personal site rather than in a peer-reviewed journal, written by a committed Georgist advocate; its enumeration of historical cases is empirical and checkable in principle, but the overall ATCOR conclusion is a theoretical argument resting on the elastic-capital and elastic-labor premises rather than a directly measured result. It is the primary citation behind the wiki's ATCOR concept page and is frequently invoked against the revenue-insufficiency objection to land value taxation.

See Also

• ATCOR — the wiki's concept page for the theorem this paper names
• Mason Gaffney — author page
• The Corruption of Economics — Gaffney's earlier statement of the same logic as "negative shifting"
• Objection: LVT wouldn't raise enough revenue — the objection this paper is cited against

Sources

1. Mason Gaffney (2005), "The Physiocratic Concept of ATCOR (All Taxes Come Out of Rent)," Working Paper WP096, excerpt from notes on "Adequacy of Land as a Tax Base" — used for all claims, quotations, and the historical case list on this page; read in full for this page. Free PDF (masongaffney.org)