With a system like this it could never hurt a lord (financially at least) to take on a knight and it will only help the realm for the lord to do so. Also, don't forget that dukes can still tax their lords to increase their earnings. On the plus side, even if taxed at the max (50% I believe) a lord of a region will never make less that their knights.
It does not hurt, but it also does not directly benefit him, which is one of the goals that we want. If we have a Lord making 100g, with one knight making say 60g, we want the addition of another knight to boost both the Lord and the existing knights income. So perhaps the addition of another knight boosts the Lords income to 120g and the two knights now make 70g a piece.
I think the easiest way to do this is to modify estate efficiency, so that rather then affect only the estate, the efficiency of the region is the combination of all estate efficiencies.
