buildings don't eat food. people do.
buildings don't pay taxes. people do.
similarly, buildings don't pay taxes, people do.
this is another one of the silly abstractions in this game that i've never been able to understand. it is my belief that linking food and income to buildings rather than the people who live in them is the single biggest problem with the strategy side of elemental. moving to a population based system will be more intuitive, and prevent city spamming.
here is how to do it.
add up your total civ food production. divide this by your population. if it exceeds a certain ratio of food per person, that settlement gets a bonus to population growth (it has the means to support more people). if it is below a certain ratio, it receives a negative to population growth. further bonuses to growth (prestige, royalty, pubs etc) also apply. this way populations grow like they do in real life, gradually stabilizing at levels that can be supported. housing should just determine the hard cap that population cannot pass.
if income that isn't from gold mining (ie, taxes) is tied to population rather than merchant buildings, then it becomes beneficial for the player to keep his population in places where he has the infrastructure to make money out of them. instead of providing base income, buildings should apply a bonus to the amount of money you make from taxes. so ten guys in level 5 settlements with administration buildings earn you more than ten guys in some village you just founded. so you have an economic incentive not to found loads of settlements.
if you build too many settlements while your food production remains constant, population growth rates will fall and your settlements will stop growing (until you increase food production or build other bonus buildings like pubs). move any of the income increasing buildings into level 2.
the player has to choose between being a large sprawling empire that controls lots of resources, where few settlements reach high levels and less non-mining income is generated, or being a wealthy cosmopolitan nation like venice, with few resources under it's control. of course, if you have enough food resources you can be both large and developed.
this philosophy can be easily set to the following music:
http://www.youtube.com/watch?v=aJ83KXUloP8&ob=av2n
