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"If the individual blocks are sold to separate households and other businesses, the 'unimproved' value of each block increases by several orders of magnitude. Where has the extra value come from? The infrastructure built on the other blocks. The 'unimproved value' of a block of land is based on the value of the improvements made by others to their land."
"What an odd tax - to be taxed on someone else's effort!" Yes when you put it that way, it looks paticularly bad. However, if you only tax to raise a certain amount of revenue (enough to protect property rights, no pork barreling, potentially education vouchers and so on), the tax collected would be low. You would just drop the rate, and keep taxes at the same "price". Although it seems unfair to tax people who bought their land first at a lower rate when most of the the time, the new homes being built bring in HR and finance that either becomes the focus of their employment or business. Your argument makes sense when you say that when the blocks get subdivided, they go up in value. Are you excluding or including pre existing features, such as rivers or fertility of land in calcualtion of the value? Land could be judged on land size, but that would exclude pre existing features. The only way to do this is to subdivide it. Maybe the unimproved value should be the pre subdivided value of subdivied land, if you can calculate that. Yes, taxes are bad.
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