>Taxes have to be higher than 1/12th of one's income ....

1/12 was precisely the medieval tax rate in most places. On top of that the
tithe was 1/10th.

Since these people are (assuming medieval economics) living at subsistance
level, only the most gentle taxes are possible before they begin litteraly
lowering the population. Also, in a medieval situation the taxes are paid
in kind or labor, not money. It is quite sensible to use a money equivelent
for a variety of reasons.

Fantasy economics need not be so constrained if the DM prefers.

Kenneth Gauck