If the carry cost is too high, who would buy the land?
The thing missing from the above scenarios is:
Owner can't afford the tax, can't find renters, can't find a buyer, so just walks away. This is why so many properties are vacant now. The owners just walked away.
Imagine a scenario where land purchase prices hover very close to $0. This is the end result of an effective LVT.
It means that you only pay for the structures, or the cost to remove a blighted structure, etc. It makes real estate more liquid, and allows more people to try their hand at development without having a massive land bank worth millions of dollars.
It decentralizes these decisions and lets more local players get involved. It rewards those who are productive, and encourages those who are squatting on resources to let somebody else give it a shot.
The point is, currently if you build things then you pay higher tax. The current tax structure disincentivizes building things. We don't know what people would build without that disincentive - maybe still nothing, as you are suggesting.
Not quite.
They have to pay up while they own the land.
They can develop it in ways that may generate revenue sufficient to cover the tax (e.g. a landlord-developer)
They can develop it in ways that won't generate revenue, but that satisfies their own goals, and pay the tax from some other source (e.g. a homeowner)
They can sell it to drop the tax liability.