At present, estate tax settings can be set such that every knight can only ever add wealth without taking any from the lord; wild lands and empty estates are taxed at 50% and the maximum tax setting for estates is 50%. If your tax rate is at 50% then any knight who takes an empty estate is creating his entire income simply by being in the estate. This is generally not feasible in rural regions with low income but in lower-density realms (for example on Dwilight) where you might only have knights in your cities then it can work quite well.
And this is assuming the lord wants to maximize his own income, for a building project for example. But if he's trying to fund the army he can lower the tax he levies from his knights to increase their income; it's a very flexible system, though I've asserted that simply having several knights is its own reward.
