Earlier quoted context omitted.
> Today, you pay very little tax on the empty land or parking lot because you’re taxed on that total value of the land and improvements. This discourages building stuff sometimes. With land value tax, you’d be taxed on what someone would pay you for that land with improvements similar to surrounding, so it’s advantageous to build something there instead of nothing, since you’re paying the same tax as the sky scraper…
You're looking at it the wrong way. They're not looking at the hypothetical improvements and charging as if you built them. They're saying "this land could reasonably support a skyscraper, therefore it is very valuable land".
Most areas can support a skyscraper, but it doesn't really make sense to build one in the middle of nowhere. Conversely it doesn't make sense to keep prime real estate next to shops & public transit a surface parking lot. LVT incentivizes developing the parcels that are in good locations into high-density, high-value uses. A traditional improvement-based property tax reverses those incentives: if you develop your parking lot into a skyscraper, you pay much more in taxes, which may be unaffordable for smaller non-corporate owners, which gives them an incentive to hold onto them and keep them as marginal low-productivity uses.