Real estate has value because of the potential flows of rent that can be obtained. Property taxes fall on both land and improvements. While the taxes on improvements are passed on to the tenant, the taxes on land cannot be, as Adam Smith showed. The rent of land, being a case of a locational monopoly, is always as high as it can be.

Thus, taxing land simply reduces the flows of rent that can be kept from controlling a location, and thus reduces the purchase price.

This makes it easier for entrepreneurs to acquire land, since the up front costs are lower.

I hadn't heard of this principle that it's impossible to pass tax increases on to tenants. I can't really believe Adam Smith has shown this to be impossible, when I know people who have said (paraphrasing), "The previous landlord has raised rents to match increases in taxes, water, garbage bills(the utilities are effectively costs of land), and we consider this reasonable".

I feel like you could even make a bet on it: There's a nearby trailer park with some mobile homes on it. This should have value solely in the land, since the homes can be removed from the property. I'm counting the availability of utilities in the land. The county tax assessment on both land and improvements is public information. Suppose the tax assessment as a whole goes up 1.7%. If the trailer park owner is able to secure a 1.7% increase over the next year from his tenants, you pay him $10,000. Otherwise, he pays you $10,000. Do you trust Adam Smith enough to take that bet? It should be impossible, since that 1.7% includes an increase of taxes on the land which you're saying cannot be passed onto the tenant.