"utilized better" in that context just means that the owner of the land can support the taxes on it, it doesn't mean suddenly we are going to put skyscrapers in el cerrito.

It would most definitely lead to densification in SF and its surroundings.

No, you won't have a skyscrapers in some random village in the middle of nowhere. But maybe the land owner, seeing how high is the LVT tax is, decides to build a 5-stories apartment building with 50 units, instead of 5 single family homes. And that's a win.