Earlier quoted context omitted.
Land value taxes are generally set arbitrarily high. Localities are incentivized to set values as high as they can attempt to justify. They end up modeling what they think could be the most profitable or valuable development on the land then tax you as if that were already done. Eventually the land ends up in the hands of the few willing and able to abuse the land to that level, prioritizing profit above all else.
your first paragraph applies pretty much equally to taxing land+developments. Also, in the context of a city building to the maximum of the zoning is a good thing in nearly all instances because higher density means you need less land to provide shelter for the inhabitants and it's way, way easier to provide most services to higher density.
Assuming that higher density is always better ignores the externalities required to maintain such a system. Higher density cities require more outside inputs brought in from outside the city. Those inputs strip resources from other lands, require input to process the raw materials, and require fuel and vehicles to transport the goods into the city frequently. The city's waste must be transported and processed somewhere, again adding impacts to the environment even if those impacts aren't directly felt within city limits.
If the goal is to minimize impact, cities would only be as large and as dense as they can reasonably be self sufficient. That doesn't preclude trade between cities, states, and countries, but it does mean the city isn't entirely dependent on a constant churn of bringing in resources from elsewhere and shipping out waste.