"If the landlord has to pay 4x tax they will pass some (all) of that increase to the renter. Also, a 4x increase in tax != 4x increase in rent."
How much of a tax gets passed along to the consumer is modeled in an introductory macroeconomics course. It depends upon the elasticity of supply and demand. A tax falls primarily on the side of the transaction with the lower elasticity, because they are less able to adapt behavior to avoid the tax.
The reason economists like a land-value tax is because the elasticity of supply for land is effectively zero: there is a fixed amount of land, and regardless of what the tax rate is, landowners are either going to seek a return on their ownership or will sell it to someone else who'll get a better return. Elasticity of demand is pretty low too, but it's not zero: people can double up with roommates, move in with families, or become homeowners. So a tax on unimproved land ends up falling almost entirely on the landlord, with relatively little long-term impact on rents.
In practice, we're likely to see pretty severe reallocations of land and short-term price dislocations, as existing landowners find that their usage is not productive enough to pay the tax and so they need to sell to new firms who will use the land in different ways. But this is working-as-intended: the goal of an LVT is to incentivize better usage of land through high-density development of desirable parcels, individual homeownership (when density makes sense), and commercial activity.
[Pardon me if I don't have a lot of respect for economists and their crackpot theories (remember 2008? What about the current inflation generated by printing money like there is no to more?)]
There are at least two problems with your logic: if you take all the land you can make the claim about the elasticity of supply, but not all land is created equal. Location, infrastructure, usage all factor into this. Taking the example of unimproved land. If I buy a piece of the said land near a town and don't use it for anything I just pay the tax on it and effectively lose money, right? What if the city builds infra near my land that makes it effective now to develop? Should I pay more tax now? It's still unimproved. Should I pay more tax in case of a rezoning if I could potentially build a house but I don't? See how I actually created one class of land by substracting from another!
If I can buy and afford (ie have the capital) to hold land for the long term + I can see where new developments are going to take I will be incentivized to hoard land. I can also make the case that it's undeveloped and I should pay less tax.
Now there is land that just sits there when it could be used for farming. Now we are having food and housing shortages.
That's why it's a land value tax, on the unimproved value of the land. Not all land is created equal. Land that's out in the boonies, which nobody wants, is going to have a low value and hence low tax. Land in a downtown area, close to all the amenities, transit, parks, etc. - will have a high value and high tax.
To answer all your questions:
"If I buy a piece of the said land near a town and don't use it for anything I just pay the tax on it and effectively lose money, right?"
Yup. Don't do that.
"What if the city builds infra near my land that makes it effective now to develop? Should I pay more tax now?"
Yes, you should.
This is actually one of the biggest arguments for a LVT, and it has three angles. The first is moral - it's society that's building the schools/parks/transit/infra that made the land value go up, so it should be society that reaps the benefits. After all, the property owner didn't pay to build that subway stop, they just got lucky and got to free-ride off of public benefits. It makes sense that the returns for building public infrastructure go back to the public in the form of additional tax revenue, which they can use to fund maintenance and new infrastructure.
The second is the economic flip-side of this: an LVT provides an incentive to right-size the government. Without this economic feedback loop, there's no check on public-sector spending tax revenues in inefficient ways. Who cares whether a new transit stop benefits residents vs. provides a boondoggle to contractors, if the benefits to residents are all captured by landlords rather than either the residents or the government? But if further public funding is contingent upon raising rents and hence tax revenues within the city, the incentive is to spend money in ways that will actually make the city more desirable and justify those higher rents.
The third economic argument is on individual landlords and developers. An LVT discourages speculation - if you're sitting on that unimproved lot and not getting any revenue from it, you're still paying taxes and will eventually go broke. Your incentive is to sell it to a developer who will build more housing on it, so that more people can enjoy the public amenities that made the land valuable in the first place. Leading into your next question:
"Should I pay more tax in case of a rezoning if I could potentially build a house but I don't?"
Yes. That's how you ensure that land is fully utilized and people who need housing can get it.
"If I can buy and afford (ie have the capital) to hold land for the long term + I can see where new developments are going to take I will be incentivized to hoard land."
It's the opposite way around - you're disincentivized from hoarding land, because you have to pay taxes on the land that's not cash-flowing. You're incentivized to sell to the people who are actually going to build and buy those new developments.
"I can also make the case that it's undeveloped and I should pay less tax."
You can also make the case that the government should just give you money, but in both that and your example, you'd be wrong. Everybody pays the same land tax, based on the unimproved value of the land. A developer who built an 80-unit apartment complex on 2 acres might pay $200K/year; a speculator who sits on 2 acres of undeveloped land also pays $200K/year. The difference is that the developer might be pulling in $2M/year and making a profit of $1.8M/year, while the speculator is slowly going broke. That and the developer is providing housing for 80 families while the speculator is doing nothing useful.
>> "What if the city builds infra near my land that makes it effective now to develop? Should I pay more tax now?"
> Yes, you should.
Doesn't this make NIMBYism even more tempting? I've got to be against any changes near my land, because it's going to increase my taxes and push me to move. In addition to not liking change in general.
A rational economic actor would not be a NIMBY under these conditions, because the increase in land values exceeds the increased tax they would pay, and so they could always sell their property for a profit and buy another one farther away from infrastructure if they don't like it.
In reality, people are change-averse and irrational for a variety of reasons, chief among them emotional attachment. So it wouldn't surprise me if people resist development in practice. A lot of NIMBYism is already of this vein - upzoning a property usually increases its value (because it can be redeveloped into more units), but is also frequently fiercely resisted by existing residents who won't sell at any price.
Note that a system can be rational even if participants are not - capitalism is, because actors who are irrational eventually go bankrupt and are forced to work for actors who are economically rational. That doesn't stop it from being unpopular, which, again, capitalism is. Many of the political issues getting an LVT adopted stem from this.
How is the value of unimproved land determined in places where there is no nearby unimproved land to compare with. For example, how would I determine this value in lower Manhattan?
You run a regression on the value of all the improvements, then subtract that from the sale price to get the value of the unimproved land. Smooth that over the per-square-foot value of neighboring properties and you can have a pretty good estimate of for the unimproved value of the land.
If you have a hundred thousand properties to collect data on, you can get a pretty good idea of "a 3BR unit increases the value of the property this much, a 2BR unit increases it by this much, X feet in height result in this change in value, per parking space the value increases by this much". Sophisticated real-estate investors and the banks that fund them are running this calculation anyway, that's how they know which properties are good deals. Once you have a formula for this, you plug in the stats of the property in question to figure out the value of the improvements, and then the unimproved value of the land is everything left over.
How much of a tax gets passed along to the consumer is modeled in an introductory macroeconomics course. It depends upon the elasticity of supply and demand. A tax falls primarily on the side of the transaction with the lower elasticity, because they are less able to adapt behavior to avoid the tax.
https://www.khanacademy.org/economics-finance-domain/microec...
The reason economists like a land-value tax is because the elasticity of supply for land is effectively zero: there is a fixed amount of land, and regardless of what the tax rate is, landowners are either going to seek a return on their ownership or will sell it to someone else who'll get a better return. Elasticity of demand is pretty low too, but it's not zero: people can double up with roommates, move in with families, or become homeowners. So a tax on unimproved land ends up falling almost entirely on the landlord, with relatively little long-term impact on rents.
In practice, we're likely to see pretty severe reallocations of land and short-term price dislocations, as existing landowners find that their usage is not productive enough to pay the tax and so they need to sell to new firms who will use the land in different ways. But this is working-as-intended: the goal of an LVT is to incentivize better usage of land through high-density development of desirable parcels, individual homeownership (when density makes sense), and commercial activity.