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See my compiled houserule thread for my tweaks, mostly I added a few more options. As to taxes I though about tweaking that and decided trade rules was a better option for economy. Beware the Magic ITem economy can get out of hand if you aren't careful.
Kingmaker is awesome but about as much work as a homebrew compaign if you want to make it shine.
Pro-tip from someone who has done this from both sides of the table, typically 1 player will dominate kingdom building while the others likely will not be as into it after you get to say the duchany point.
Edicts are typically set and forget as written, if you make them more valuable they might become more crucial but at least for my players they need to roll a 1 to fail any roll. Economics rolls are just a small portion of their overall BP from Magic item sales, trade rules, farming, and general hex development.
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I am working on changing a bit on how the economy rules work but here is a simple change to the Taxation Edict.
When you make your Economy roll to determine the kingdom's income, instead of diving the result by 5, you divide it by the taxation value listed on the table below. Always round results down.
Thus, if you roll 50 on your Economy check, and you have Heavy taxation, you divide 50 by 4 for a result of 12. If the taxation is Overwhelming you would divide by 3 for a result of 16.
I changed what the penalty affects from Loyalty to Stability because Loyalty does not have a monthly roll. Having it be Stability keeps players from racking up the Taxation level way too high.
Taxation Level---Taxation---Stability Penalty
None------------ 0--------- +1
Light----------- 6--------- -1
Normal---------- 5--------- -2
Heavy----------- 4--------- -4
Overwhelming---- 3--------- -8
We tend handle things a bit differently.
We use the rules for the underlying effects - They are in place and they can let the nation just bobble along with the edicts in place. Every thing bobs along nicely and boringly in the background.
However, the PCs occasionally come up with different ways of doing things. For example, at the last winter festival they decided to send out some extra goodies to the farms and villages. So I gave them some pluses on kingdom rolls for a couple of months. (note although the exact same thing won't work a second time). Occasionally, I put in an extra RP-style problem. If they fix it, well and good. If not, there will be some negatives until they do.
For us, the Kingdom Building and running fits around the narrative - rather than the other way around.
I will have something posted soon about that.And I'm definitely doing something about the magic item economy, although I haven't decided what, yet.
I can tell you capping a maximum amount of returns and providing alternative sources of income worked great for my crew.
My thought about the Tax edict is that instead of dividing a successful Economy roll by 5, you divide it by a number based on your taxation level - from 6 at no taxes, up to 3 at maximum rate. This makes the effect much larger and makes it far more likely that the players will keep adjusting it based on the state of the treasury.
(edit - and I see CalebTGordan has had the same idea. Please let me know how it works out for you)
I have also significantly cut back the magic item economy, cut down the number of building types, but added more ways to develop non-city hexes in addition to farmland.
I'm hoping that between the changes I've ended up with something balanced, but if some of the numbers go a bit awry I figure I can always use Kingdom Events to bring them back in line.