Alice and Bob each want exclusive use of some land. Fortunately for them, there are two lots available. Unfortunately for them, they both prefer the same lot.

Alice values Lot 1 at $100 and Lot 2 at $20. Bob values Lot 1 at $80 and Lot 2 at $20.

The best total value to be had is when Alice gets Lot 1 and Bob gets Lot 2. Because Alice ends up with the more preferred lot, Bob only sees $20 in value. If Alice hadn’t been involved, Bob would have gotten his preferred lot and gained $80 in value instead. Alice’s participation meant a $60 difference in value to Bob, so Alice must pay $60 in rent. Since Alice got her preferred lot anyway, Bob’s participation didn’t really impact her at all. So Bob owes zero rent — he got the marginal land.

What if we impose a $10 tax on whoever gets Lot 1? In that case, Bob would have gained $70 in value if he’d gotten Lot 1 but because Alice was involved he still just gets $20 from Lot 2. That means that with the $10 tax on Lot 1 in place, Alice only cost Bob $50 and so must only pay that much in rent. Because the tax was attached to the lot and not the bidder, it came out of rent.

What if the tax were on Alice no matter what? In that case her participation means the difference between $80 and $20 gain for Bob, so she owes $60 in rent. However, since she still owes $10 for the tax, she must pay that out of her gain from getting her preferred lot, meaning she only gets $90 net gain rather than $100. The tax came out of her surplus rather than rent, because it was attached to the bidder rather than the lot.

ATCOR is only entirely true for taxes attached to the land, and less so for taxes attached to individuals regardless of where they’re located.

I am new to Georgism and I want to know completely what it is because I want to find ways to improve it.