> I would bet dollars to donuts that the mere holding
> of land does not 
> yield an average return over a long period that is
> equivalent to or 
> greater than the interest rate on triple A bonds.

As population and commerce grow, over time real land
rent rises, and there is no a priori reason to believe
that the rise in rent must equal the return on bonds.
Over the very long run, with perfect knowledge of the
future, the price of land will anticipate the growth
of rent, and the return on the price will indeed be
equal to that of bonds.  However, with uncertainty,
the most optimistic speculators will buy and make the
price of land go up more than the long-run average,
which will then cause a fall when expecations are not
fulfilled, so what we see is a boom-bust cycle. We are
now in the bust.

> entrepreneurs are in the
> business of trying 
> to earn profit from their appraisals and uses of
> land. They are not 
> parkers of funds.

Speculators are parkers when they believe that the
price of the real estate will go up more than
alternative assets.  There are also lazy owners who
park land because the carrying cost is low and the
land value rises enought to satisfy them.
 
> If a
> government taxes only 
> surface land, regardless of how it is used,
> entrepreneurs will economize 
> on its use by building skyscrapers and 7-story
> basements.

Yes. The cash cost of the tax has a greater
psychological punch than the implicit opportunity
cosgt of foregone rental income.

> Homemakers 
> will live in balloons, sewers, and houseboats,
> assuming that these 
> living quarters are not regarded as land.

The space is indeed land.

> The new uses of the land
> and the space are 
> not efficient. 

You privilege the status quo.
How do you know that the status quo is efficient
relative to a tax on land space?
Suppose private owners owned the space and owners of
buildings paid them land rent.
Would the use of space be inefficient?

Fred Foldvary