So, you have a lot of land with a single family home, but you are taxed for it as if 20-unit apartment building was standing there. Which, in the long run, incentivizes you to sell your home to some developer that would actually build such building.
Now you can discuss if that's fair approach, or just a way to force people out of their homes.
Everything I have read just uses nearby property prices. Very similar to GV valuations as we currently do in New Zealand with our council rates (just use that figure rather than another). As market prices shift, your Capital Value remains relatively constant (maybe inflation less depreciation), and the Land Value shifts to meet market value (usually upwards, whenever your property rating is updated).
In New Zealand we currently have a partial land-value-tax called rates, although they are usually far below LVT suggested taxation rates. Rates are low, but still a significant drain. Mortgages are also similar to a LVT - your mortgage has to pay the land value - and that is certainly more than suggested LVT. Apparently the point of an LVT is not to get revenues, so I don’t quite understand how that works. A tax that is less than a mortgage already is - hmmmmmm - how can that help?
Ironically house prices are set by people bidding against each other for how big their mortgage can be. The tax won’t shift house prices, just shift money from private equity to government? See: https://news.ycombinator.com/item?id=34097478
The arguments I have read are usually so vague and seem to always miss critical details. I am not a property or economics specialist, yet I see glaring problems and omissions in well received blogs: that doesn’t bode well IMHO.
So you are proposing to increase average taxes by $5000, and you appear to talk about that as though that is some trivial amount the anverage New Zealander can afford. A land tax as you propose is an absolutely massive taxation increase.
Say that a land tax takes 50% of all rental income (a large amount) in New Zealand and puts that into the government - how can you believe that is equitable for renters or owners?
The point of a land tax is to take the land profits from private owners, and put it into government coffers. Note that it doesn’t change the amount that renters pay. You think that it would correct rent prices in New Zealand?
$1 million of land is not extreme wealth - it is only 2 or 3 times an average home. Where do you live that $10000 after tax is not a huge amount of money annually?