Realms should be able to tax cities as proxies for duchies.
That will provoke dukes to seek "supplemental income:" ducal taxes. As is, ducal taxes are, in my experienced, widely under- or unused. If the realm could tax a city it would provoke the duke to seek vassals who he can tax. This will promote competition for vassals, as a larger duchy could run a lower ducal tax rate and still have the duke acquire the same income.
Except that if you take on knights with a share of the duchy income, as far as I know, they don't get any estates. In which case you are paying them and getting nothing in return, or just about.
