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SFHs were being sold at a price less than the cost it would be to replace the structure. Hence, the land values were negative.
Having a tax authority send funds to the hapless owners wouldn't be sound policy.
Also, the sheer volatility of land prices would bedevil any government that tries it. Taxes for the helpless owners could easily go up by 5 times the amount the prior year. Likewise, tax revenue could easily plummet by 50% in a given year causing any and all spending programs to become a crapshoot as well as government employment levels to fluctuate wildly (you think we have graft and corruption now wait until 75% of a police force is fired for simply not having the tax resources
What is waaaay the fuck more volatile than tax revenues from land is revenues from 'progressive' income taxation. That is why California is flush with money and can quickly go into big deficits in like less than a year.