The classic example is the lot that sits empty or has a parking structure on it in Manhattan. 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 next door.

In other words, the taxable value of the land is what it would be if it had similar improvements to surrounding lands, rather than taxing it based on actual improvements.