Land tax is a state level tax, so I'm not sure if it's everywhere. Stamp duty is ridiculous though, I agree.

The market does by pricing the land at a certain value

Yes the owner. Who else? They own it.

Edit: Was the stress on "decides" or "best"?

It is only the owner who gets to decide the best use, whatever they want! But the land value is determined by what others are willing to pay to no longer be excluded from the area, or to be given a spot in the area.

The market.