I think I need to think about this some more. It seems like the goal of government is to figure out the tax rate that counters the land value perfectly without taxing any more. The fact that it is unimproved land value means we aren't stuck in an efficiency trap since a diverse enough set of uses can improve the land sufficiently to generate a reasonable economic profit in non-rent form. Countering speculation is definitely a strong positive effect.

I worry that the overtaxation causing vacation mechanism isn't very efficient because if the tax takes a small part of the land value improvement it seems that the government gets additional unearned revenue while only land with little to no improvement would be vacated. I think people only vacate if the taxes cut into their additional revenues too steeply. I'm not sure exactly where the too steep point is, but I think governments would have an incentive to overestimate the value of land.