If the wealthy do decide to hold their wealth in other forms, this could potentially free up land for more productive uses or for those who might not have had access to land ownership before. This could lead to a more equitable distribution of land, which is a form of wealth in itself.
The argument that the wealthy will simply shift their wealth to other less-taxed or non-taxed forms is not necessarily a critique of the LVT, but rather a critique of the overall tax system. If other forms of wealth are undertaxed, the solution would be to reform these areas of the tax system, rather than reject the LVT.
And your original claim was:
> Therefore, an LVT wouldn't distort market incentives, unlike other taxes. By shifting the tax burden onto land, we could potentially reduce the distortionary effects of other taxes and promote economic growth.
If you keep the other taxes, that benefit is reduced, compared to if other taxes were eliminating. (Though, on re-reading, I do see several bits of language that indicate you were thinking about not eliminating other taxes.)
"Efficient" by one specific measure--how much money you can make from the land. But who says that's the best measure to guide land use?
What do you propose is the best measure to guide land use and what policies can be put in place to align those principles?
It actually doesn't, because if you hold unused land it's already fully rational for you to sell or lease it, so that some other activity can take place on it instead - any land that's taxed by LVT must by definition have some economic value. LVT may discourage pointless speculation in land values, but that's a benefit and far from a 'distortion'.
Say I've got a few acres of forest that I want to keep as forest for carbon capture and as a place for birds to rest during the annual migration, and say there are logging, mining, and oil companies that want to log, mine, or drill on that land.
Under the present system keeping it as a forest doesn't make my position worse. It just means I don't reap the profits that I could reap by selling or leasing. Its an opportunity cost, not a real cost.
Under LVT my taxes go up because of those valuable potential uses. That's a real cost to me for keeping the forest.
You could even add a life tenancy for yourself to the deal -- you'd probably get out of paying any taxes at all.
It's unclear (at least to me) why Google, say, whose business activity is very non-land-intensive, should be in a favorable tax position compared to, say, farming. You say "because the farmers use more land!" And it's true; they do. But if you don't already believe that land should be the determinant of tax, that explanation doesn't give you any reason to start believing.
Re wealth inequality: No, this tax will make the wealthy hold less of their wealth in the form of land. They'll just hold it in some other form, and that other form will be taxed less or none. That might redistribute land more evenly across society, and that might be a net win, but it won't redistribute wealth very much.