In the case you describe, that's mostly correct; however, you would end up paying on a $2mil valuation if you built a $1mil home on the property. Under a Land Value Tax, you'd only pay taxes on the property ("ground rent"), regardless of what's built on top of it. This incentivizes productive use, rather than idle speculation. (In urban settings, where the location value of property is at a premium, the most profitable use is often a parking lot rather than residences or businesses: not because it's the greatest return, but because the improvement cost and therefore the tax increase are near-zero.)