> If all landlords' costs go up (e.g. taxes) then all landlords will raise rents to maintain the same previously optimal profit margin they were extracting.

And then all landlords will see a surge in vacancies, and not all landlords are able to tolerate paying LVT on empty units for very long before they're forced to drop their rents back to the actual market value.

> why not raise taxes to $1M/sq.ft.? $1B/sq.ft.?

Same reason why landlords can't raise rents to $1M/sq.ft or $1B/sq.ft: because nobody in their right mind would pay that much.