I like what Salvius says. Things such as taxes should be automatic as collecting in a video game would be tough. And an 'automatic gate' would make life easier.
As for who 'rules', ya, that's more complicated. I suppose it could be by agreement. Just a dialogue box where you hit 'accept' when someone asks for 30% of your income. You could always say 'no' provided you accept the circumstances.
This would allow for a more feudal society. As the player base grows, the layers of society will grow too. If you own a large tract of land you could get 3 other players farming on it as well, and you collect 30% off each. With that money you could build a keep for storage and a place of safety for your farmers, and you'd do what you can to ensure they succeed as you get a cut.
And perhaps you'd also have to pay a percentage to a nearby town ruler for 'protection'. In the town there would be rents on shops and houses to be collected, and a sales tax on goods exchanged there. The rents, and the gatehouse rules, would be controlled by whoever built the walls (or claimed ownership). Since there might be a bit of back and forth, perhaps the money and the controls would be in the gatehouse which could be accessed only by the owner, or by force... perhaps possession of it for a day or two til you have full control over it.
Sales tax would go to whoever keeps trade safe between the cities. I would think this would be the king... or President or Grand High Dragon Wizard or whatever you want to call it. Market places are established in towns by said ruler with the 'accept' dialogue between him and the town ruler. The idea is he'll ensure authorized caravans can travel safely.
I think there should be a lot of tax as only organized groups should be able to afford the really good armour and siege equipment etc. We don't want a guy to sell his first harvest and buy full plate then go killing noobs (a guy who wants to be a bandit should be armed like a bandit in WB single player). But we do want guys fighting big battles in good gear which would be returned... unless the guy decides to desert... so don't equip new players with your best gear.
For all you anachronists out there that want a democracy or theocracy or whatever can still vote who your leaders are, but you'll just have to trust him once he's in that he won't enact martial rule.
That doesn't feel very natural. It'be better, if the ruler was an actual admin. But he would be a ruler for the whole faction, not a city. Maybe the map would start with a small capital, where the ruler would reside + a small houses in the forests beside the capitals for every player and his NPCs. Then as people start building settlements around resources, there would be a Mayor appointed for that settlement. This would be decided, by the players themselves.
At some point the admin ruler would die and there would be a fight/vote for a new one, again players decide.
This new player ruler gets a few extra NPCs - servants. He uses them to collect taxes etc.
This ensures, that a faction can be ruled only by a person, who is a great conqueror and captures enemy NPCs for enslavement, so he can manage his growing city OR a group of organized people that don't need as many NPCs to run a faction, because they are willing to keep everything running.
Also, players can ignore the ruler and just do their own thing. The ruler can issue a bounty on such a person. Or he can be a mad ruler and issue a bounty on the chill woodcutter that lives next to his castle, just because he looked at him funny. The fundamental thing to this, is that everything is carried by a word of mouth and posters, either carried by a player or an appointed NPC - no automatic stuff.
